Correlation Between Applied Materials and Roche Holding
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Roche Holding 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 Roche Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Roche Holding AG, you can compare the effects of market volatilities on Applied Materials and Roche Holding 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 Roche Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Roche Holding.
Diversification Opportunities for Applied Materials and Roche Holding
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and Roche is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding AG 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of Applied Materials i.e., Applied Materials and Roche Holding go up and down completely randomly.
Pair Corralation between Applied Materials and Roche Holding
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.42 times more return on investment than Roche Holding. However, Applied Materials is 1.42 times more volatile than Roche Holding AG. It trades about 0.05 of its potential returns per unit of risk. Roche Holding AG is currently generating about 0.01 per unit of risk. If you would invest 203,789 in Applied Materials on September 14, 2024 and sell it today you would earn a total of 141,411 from holding Applied Materials or generate 69.39% 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. Roche Holding AG
Performance |
| Timeline |
| Applied Materials |
| Roche Holding AG |
Applied Materials and Roche Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Roche Holding
The main advantage of trading using opposite Applied Materials and Roche Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Roche Holding 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 Roche Holding will offset losses from the drop in Roche Holding'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 |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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