Correlation Between Applied Materials and Investment
Can any of the company-specific risk be diversified away by investing in both Applied Materials and 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 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 The Investment, you can compare the effects of market volatilities on Applied Materials and 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Investment.
Diversification Opportunities for Applied Materials and Investment
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Investment is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment has no effect on the direction of Applied Materials i.e., Applied Materials and Investment go up and down completely randomly.
Pair Corralation between Applied Materials and Investment
Assuming the 90 days trading horizon Applied Materials is expected to generate 2.39 times more return on investment than Investment. However, Applied Materials is 2.39 times more volatile than The Investment. It trades about 0.06 of its potential returns per unit of risk. The Investment is currently generating about 0.08 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. The Investment
Performance |
| Timeline |
| Applied Materials |
| Investment |
Applied Materials and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Investment
The main advantage of trading using opposite Applied Materials and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, 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 Investment will offset losses from the drop in 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 |
| Investment vs. Uniper SE | Investment vs. Mulberry Group PLC | Investment vs. London Security Plc | Investment vs. Triad Group PLC |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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