Correlation Between Applied Materials and Biogen
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Biogen 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 Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Biogen Inc, you can compare the effects of market volatilities on Applied Materials and Biogen 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 Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Biogen.
Diversification Opportunities for Applied Materials and Biogen
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and Biogen is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Applied Materials i.e., Applied Materials and Biogen go up and down completely randomly.
Pair Corralation between Applied Materials and Biogen
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Biogen. In addition to that, Applied Materials is 2.09 times more volatile than Biogen Inc. It trades about -0.13 of its total potential returns per unit of risk. Biogen Inc is currently generating about -0.2 per unit of volatility. If you would invest 343,920 in Biogen Inc on September 10, 2024 and sell it today you would lose (22,740) from holding Biogen Inc or give up 6.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Biogen Inc
Performance |
| Timeline |
| Applied Materials |
| Biogen Inc |
Applied Materials and Biogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Biogen
The main advantage of trading using opposite Applied Materials and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.| Applied Materials vs. The Select Sector | Applied Materials vs. Promotora y Operadora | Applied Materials vs. SPDR Series Trust | Applied Materials vs. iShares Trust |
| Biogen vs. Roche Holding AG | Biogen vs. Amgen Inc | Biogen vs. Gilead Sciences | Biogen vs. The Select Sector |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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