Correlation Between Gamma Communications and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and Applied Materials, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Applied Materials.
Diversification Opportunities for Gamma Communications and Applied Materials
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gamma and Applied is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Gamma Communications 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 Gamma Communications plc 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 Gamma Communications i.e., Gamma Communications and Applied Materials go up and down completely randomly.
Pair Corralation between Gamma Communications and Applied Materials
Assuming the 90 days horizon Gamma Communications plc is expected to generate 0.48 times more return on investment than Applied Materials. However, Gamma Communications plc is 2.07 times less risky than Applied Materials. It trades about 0.01 of its potential returns per unit of risk. Applied Materials is currently generating about -0.07 per unit of risk. If you would invest 1,870 in Gamma Communications plc on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Gamma Communications plc or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. Applied Materials
Performance |
| Timeline |
| Gamma Communications plc |
| Applied Materials |
Gamma Communications and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Applied Materials
The main advantage of trading using opposite Gamma Communications and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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.| Gamma Communications vs. Performance Food Group | Gamma Communications vs. Waste Management | Gamma Communications vs. CeoTronics AG | Gamma Communications vs. Cleanaway Waste Management |
| Applied Materials vs. ASML Holding NV | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings | Applied Materials vs. Origin Agritech |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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