Correlation Between Applied Materials, and So Martinho
Can any of the company-specific risk be diversified away by investing in both Applied Materials, and So Martinho 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 So Martinho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials, and So Martinho SA, you can compare the effects of market volatilities on Applied Materials, and So Martinho 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 So Martinho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials, and So Martinho.
Diversification Opportunities for Applied Materials, and So Martinho
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and SMTO3 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and So Martinho SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Martinho SA 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 So Martinho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Martinho SA has no effect on the direction of Applied Materials, i.e., Applied Materials, and So Martinho go up and down completely randomly.
Pair Corralation between Applied Materials, and So Martinho
Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.27 times more return on investment than So Martinho. However, Applied Materials, is 1.27 times more volatile than So Martinho SA. It trades about -0.01 of its potential returns per unit of risk. So Martinho SA is currently generating about -0.14 per unit of risk. If you would invest 10,791 in Applied Materials, on November 9, 2024 and sell it today you would lose (200.00) from holding Applied Materials, or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials, vs. So Martinho SA
Performance |
| Timeline |
| Applied Materials, |
| So Martinho SA |
Applied Materials, and So Martinho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials, and So Martinho
The main advantage of trading using opposite Applied Materials, and So Martinho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials, position performs unexpectedly, So Martinho 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 So Martinho will offset losses from the drop in So Martinho's long position.| Applied Materials, vs. G2D Investments | Applied Materials, vs. SK Telecom Co, | Applied Materials, vs. MAHLE Metal Leve | Applied Materials, vs. Metalurgica Gerdau SA |
| So Martinho vs. SLC Agrcola SA | So Martinho vs. Cosan SA | So Martinho vs. Minerva SA | So Martinho vs. Randon SA Implementos |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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