Correlation Between Haier Smart and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Haier Smart 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 Haier Smart and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Haier Smart Home and Applied Materials, you can compare the effects of market volatilities on Haier Smart 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 Haier Smart with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and Applied Materials.
Diversification Opportunities for Haier Smart and Applied Materials
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Haier and Applied is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Haier Smart 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 Haier Smart Home 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 Haier Smart i.e., Haier Smart and Applied Materials go up and down completely randomly.
Pair Corralation between Haier Smart and Applied Materials
Assuming the 90 days trading horizon Haier Smart is expected to generate 1.12 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Haier Smart Home is 1.28 times less risky than Applied Materials. It trades about 0.07 of its potential returns per unit of risk. Applied Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,900 in Applied Materials on September 20, 2024 and sell it today you would earn a total of 7,700 from holding Applied Materials or generate 86.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Haier Smart Home vs. Applied Materials
Performance |
| Timeline |
| Haier Smart Home |
| Applied Materials |
Haier Smart and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Haier Smart and Applied Materials
The main advantage of trading using opposite Haier Smart and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haier Smart 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.| Haier Smart vs. Apple Inc | Haier Smart vs. Apple Inc | Haier Smart vs. Apple Inc | Haier Smart vs. Apple Inc |
| Applied Materials vs. Tokyo Electron Limited | Applied Materials vs. Superior Plus Corp | Applied Materials vs. SIVERS SEMICONDUCTORS AB | Applied Materials vs. Norsk Hydro ASA |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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