Correlation Between Applied Materials and Fair Oaks
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Fair Oaks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Applied Materials and Fair Oaks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Fair Oaks Income, you can compare the effects of market volatilities on Applied Materials and Fair Oaks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Applied Materials with a short position of Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Fair Oaks.
Diversification Opportunities for Applied Materials and Fair Oaks
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Fair is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income and Applied Materials is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Applied Materials are associated (or correlated) with Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of Applied Materials i.e., Applied Materials and Fair Oaks go up and down completely randomly.
Pair Corralation between Applied Materials and Fair Oaks
Assuming the 90 days trading horizon Applied Materials is expected to generate 5.51 times more return on investment than Fair Oaks. However, Applied Materials is 5.51 times more volatile than Fair Oaks Income. It trades about 0.05 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.13 per unit of risk. If you would invest 14,698 in Applied Materials on September 3, 2024 and sell it today you would earn a total of 3,455 from holding Applied Materials or generate 23.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Applied Materials vs. Fair Oaks Income
Performance |
| Timeline |
| Applied Materials |
| Fair Oaks Income |
Applied Materials and Fair Oaks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Fair Oaks
The main advantage of trading using opposite Applied Materials and Fair Oaks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Fair Oaks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fair Oaks will offset losses from the drop in Fair Oaks' long position.| Applied Materials vs. SMA Solar Technology | Applied Materials vs. Arcticzymes Technologies ASA | Applied Materials vs. DXC Technology Co | Applied Materials vs. Waste Management |
| Fair Oaks vs. Toyota Motor Corp | Fair Oaks vs. SoftBank Group Corp | Fair Oaks vs. OTP Bank Nyrt | Fair Oaks vs. Las Vegas Sands |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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