Correlation Between Applied Materials and Herald Investment
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Herald Investment 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 Herald Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Herald Investment Trust, you can compare the effects of market volatilities on Applied Materials and Herald Investment 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 Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Herald Investment.
Diversification Opportunities for Applied Materials and Herald Investment
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Herald is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust 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 Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Applied Materials i.e., Applied Materials and Herald Investment go up and down completely randomly.
Pair Corralation between Applied Materials and Herald Investment
Assuming the 90 days trading horizon Applied Materials is expected to generate 2.34 times more return on investment than Herald Investment. However, Applied Materials is 2.34 times more volatile than Herald Investment Trust. It trades about 0.06 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.05 per unit of risk. If you would invest 10,348 in Applied Materials on August 27, 2024 and sell it today you would earn a total of 7,230 from holding Applied Materials or generate 69.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Applied Materials vs. Herald Investment Trust
Performance |
| Timeline |
| Applied Materials |
| Herald Investment Trust |
Applied Materials and Herald Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Herald Investment
The main advantage of trading using opposite Applied Materials and Herald Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Herald Investment 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 Herald Investment will offset losses from the drop in Herald Investment's long position.| Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Hyundai Motor | Applied Materials vs. Toyota Motor Corp |
| Herald Investment vs. Worldwide Healthcare Trust | Herald Investment vs. Datagroup SE | Herald Investment vs. Datalogic | Herald Investment vs. Primary Health Properties |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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