Correlation Between Applied Materials and PPHE Hotel
Can any of the company-specific risk be diversified away by investing in both Applied Materials and PPHE Hotel 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 PPHE Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and PPHE Hotel Group, you can compare the effects of market volatilities on Applied Materials and PPHE Hotel 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 PPHE Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and PPHE Hotel.
Diversification Opportunities for Applied Materials and PPHE Hotel
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and PPHE is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group 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 PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of Applied Materials i.e., Applied Materials and PPHE Hotel go up and down completely randomly.
Pair Corralation between Applied Materials and PPHE Hotel
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the PPHE Hotel. In addition to that, Applied Materials is 1.65 times more volatile than PPHE Hotel Group. It trades about -0.03 of its total potential returns per unit of risk. PPHE Hotel Group is currently generating about 0.07 per unit of volatility. If you would invest 123,313 in PPHE Hotel Group on September 12, 2024 and sell it today you would earn a total of 7,687 from holding PPHE Hotel Group or generate 6.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. PPHE Hotel Group
Performance |
| Timeline |
| Applied Materials |
| PPHE Hotel Group |
Applied Materials and PPHE Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and PPHE Hotel
The main advantage of trading using opposite Applied Materials and PPHE Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, PPHE Hotel 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 PPHE Hotel will offset losses from the drop in PPHE Hotel's long position.| Applied Materials vs. Hong Kong Land | Applied Materials vs. Neometals | Applied Materials vs. Coor Service Management | Applied Materials vs. Fidelity Sustainable USD |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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