Correlation Between Applied Materials, and TechnipFMC Plc
Can any of the company-specific risk be diversified away by investing in both Applied Materials, and TechnipFMC Plc 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 TechnipFMC Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials, and TechnipFMC plc, you can compare the effects of market volatilities on Applied Materials, and TechnipFMC Plc 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 TechnipFMC Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials, and TechnipFMC Plc.
Diversification Opportunities for Applied Materials, and TechnipFMC Plc
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and TechnipFMC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and TechnipFMC plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC plc 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 TechnipFMC Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC plc has no effect on the direction of Applied Materials, i.e., Applied Materials, and TechnipFMC Plc go up and down completely randomly.
Pair Corralation between Applied Materials, and TechnipFMC Plc
Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.84 times more return on investment than TechnipFMC Plc. However, Applied Materials, is 1.84 times more volatile than TechnipFMC plc. It trades about 0.1 of its potential returns per unit of risk. TechnipFMC plc is currently generating about 0.13 per unit of risk. If you would invest 10,178 in Applied Materials, on October 26, 2024 and sell it today you would earn a total of 1,056 from holding Applied Materials, or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials, vs. TechnipFMC plc
Performance |
| Timeline |
| Applied Materials, |
| TechnipFMC plc |
Applied Materials, and TechnipFMC Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials, and TechnipFMC Plc
The main advantage of trading using opposite Applied Materials, and TechnipFMC Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials, position performs unexpectedly, TechnipFMC Plc 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 TechnipFMC Plc will offset losses from the drop in TechnipFMC Plc's long position.| Applied Materials, vs. Alaska Air Group, | Applied Materials, vs. Zoom Video Communications | Applied Materials, vs. Telecomunicaes Brasileiras SA | Applied Materials, vs. Marfrig Global Foods |
| TechnipFMC Plc vs. Schlumberger Limited | TechnipFMC Plc vs. Baker Hughes | TechnipFMC Plc vs. Halliburton | TechnipFMC Plc vs. Datadog, |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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