Correlation Between Applied Materials and EBay
Can any of the company-specific risk be diversified away by investing in both Applied Materials and EBay 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 EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and eBay Inc, you can compare the effects of market volatilities on Applied Materials and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and EBay.
Diversification Opportunities for Applied Materials and EBay
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Applied and EBay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Applied Materials i.e., Applied Materials and EBay go up and down completely randomly.
Pair Corralation between Applied Materials and EBay
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.3 times less return on investment than EBay. In addition to that, Applied Materials is 1.73 times more volatile than eBay Inc. It trades about 0.06 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.13 per unit of volatility. If you would invest 71,297 in eBay Inc on September 12, 2024 and sell it today you would earn a total of 57,403 from holding eBay Inc or generate 80.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. eBay Inc
Performance |
| Timeline |
| Applied Materials |
| eBay Inc |
Applied Materials and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and EBay
The main advantage of trading using opposite Applied Materials and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| Applied Materials vs. The Select Sector | Applied Materials vs. Promotora y Operadora | Applied Materials vs. iShares Global Timber | Applied Materials vs. SPDR Series Trust |
| EBay vs. Cognizant Technology Solutions | EBay vs. Grupo Sports World | EBay vs. KB Home | EBay vs. DXC Technology |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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