Correlation Between Applied Materials, and Dell Technologies
Can any of the company-specific risk be diversified away by investing in both Applied Materials, and Dell Technologies 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 Dell Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials, and Dell Technologies, you can compare the effects of market volatilities on Applied Materials, and Dell Technologies 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 Dell Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials, and Dell Technologies.
Diversification Opportunities for Applied Materials, and Dell Technologies
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Dell is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Applied Materials, i.e., Applied Materials, and Dell Technologies go up and down completely randomly.
Pair Corralation between Applied Materials, and Dell Technologies
Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.94 times less return on investment than Dell Technologies. But when comparing it to its historical volatility, Applied Materials, is 1.32 times less risky than Dell Technologies. It trades about 0.06 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 20,334 in Dell Technologies on October 26, 2024 and sell it today you would earn a total of 47,263 from holding Dell Technologies or generate 232.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.17% |
| Values | Daily Returns |
Applied Materials, vs. Dell Technologies
Performance |
| Timeline |
| Applied Materials, |
| Dell Technologies |
Applied Materials, and Dell Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials, and Dell Technologies
The main advantage of trading using opposite Applied Materials, and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials, position performs unexpectedly, Dell Technologies 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 Dell Technologies will offset losses from the drop in Dell Technologies' long position.| Applied Materials, vs. The Home Depot | Applied Materials, vs. Verizon Communications | Applied Materials, vs. Ameriprise Financial | Applied Materials, vs. Zoom Video Communications |
| Dell Technologies vs. Healthpeak Properties | Dell Technologies vs. Paycom Software | Dell Technologies vs. Spotify Technology SA | Dell Technologies vs. Caesars Entertainment, |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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