Correlation Between Applied Materials and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Costco Wholesale 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 Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Costco Wholesale, you can compare the effects of market volatilities on Applied Materials and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Costco Wholesale.
Diversification Opportunities for Applied Materials and Costco Wholesale
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Costco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Applied Materials i.e., Applied Materials and Costco Wholesale go up and down completely randomly.
Pair Corralation between Applied Materials and Costco Wholesale
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.4 times more return on investment than Costco Wholesale. However, Applied Materials is 1.4 times more volatile than Costco Wholesale. It trades about 0.47 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.02 per unit of risk. If you would invest 337,800 in Applied Materials on October 25, 2024 and sell it today you would earn a total of 67,400 from holding Applied Materials or generate 19.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Costco Wholesale
Performance |
| Timeline |
| Applied Materials |
| Costco Wholesale |
Applied Materials and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Costco Wholesale
The main advantage of trading using opposite Applied Materials and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Applied Materials vs. Grupo Sports World | Applied Materials vs. Micron Technology | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. DXC Technology |
| Costco Wholesale vs. The Home Depot | Costco Wholesale vs. Hoteles City Express | Costco Wholesale vs. KB Home | Costco Wholesale vs. Applied Materials |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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