Correlation Between Dell Technologies and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Dell Technologies and Applied Materials 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 Dell Technologies and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dell Technologies and Applied Materials, you can compare the effects of market volatilities on Dell Technologies and Applied Materials 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 Dell Technologies with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Applied Materials.
Diversification Opportunities for Dell Technologies and Applied Materials
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dell and Applied is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Dell Technologies 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 Dell Technologies are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Dell Technologies i.e., Dell Technologies and Applied Materials go up and down completely randomly.
Pair Corralation between Dell Technologies and Applied Materials
Assuming the 90 days trading horizon Dell Technologies is expected to generate 1.45 times more return on investment than Applied Materials. However, Dell Technologies is 1.45 times more volatile than Applied Materials. It trades about 0.03 of its potential returns per unit of risk. Applied Materials is currently generating about -0.02 per unit of risk. If you would invest 11,742 in Dell Technologies on September 3, 2024 and sell it today you would earn a total of 414.00 from holding Dell Technologies or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dell Technologies vs. Applied Materials
Performance |
| Timeline |
| Dell Technologies |
| Applied Materials |
Dell Technologies and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dell Technologies and Applied Materials
The main advantage of trading using opposite Dell Technologies and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Dell Technologies vs. TOWNSQUARE MEDIA INC | Dell Technologies vs. ANTA SPORTS PRODUCT | Dell Technologies vs. PRECISION DRILLING P | Dell Technologies vs. Universal Entertainment |
| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Lam Research |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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