Correlation Between Analog Devices and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Applied Materials, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Applied Materials.
Diversification Opportunities for Analog Devices and Applied Materials
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Analog and Applied is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Applied Materials go up and down completely randomly.
Pair Corralation between Analog Devices and Applied Materials
Considering the 90-day investment horizon Analog Devices is expected to generate 0.56 times more return on investment than Applied Materials. However, Analog Devices is 1.78 times less risky than Applied Materials. It trades about 0.09 of its potential returns per unit of risk. Applied Materials is currently generating about -0.11 per unit of risk. If you would invest 21,194 in Analog Devices on September 14, 2024 and sell it today you would earn a total of 578.00 from holding Analog Devices or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Applied Materials
Performance |
| Timeline |
| Analog Devices |
| Applied Materials |
Analog Devices and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Applied Materials
The main advantage of trading using opposite Analog Devices and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.| Analog Devices vs. ON Semiconductor | Analog Devices vs. Monolithic Power Systems | Analog Devices vs. Globalfoundries | Analog Devices vs. Wisekey International Holding |
| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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