Correlation Between Applied Materials and Visa
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Visa Inc, you can compare the effects of market volatilities on Applied Materials and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Visa.
Diversification Opportunities for Applied Materials and Visa
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Applied and Visa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Applied Materials i.e., Applied Materials and Visa go up and down completely randomly.
Pair Corralation between Applied Materials and Visa
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.73 times more return on investment than Visa. However, Applied Materials is 1.73 times more volatile than Visa Inc. It trades about 0.14 of its potential returns per unit of risk. Visa Inc is currently generating about 0.06 per unit of risk. If you would invest 341,000 in Applied Materials on October 14, 2024 and sell it today you would earn a total of 15,100 from holding Applied Materials or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Visa Inc
Performance |
| Timeline |
| Applied Materials |
| Visa Inc |
Applied Materials and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Visa
The main advantage of trading using opposite Applied Materials and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Applied Materials vs. Hoteles City Express | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Grupo Carso SAB | Applied Materials vs. Costco Wholesale |
| Visa vs. KB Home | Visa vs. Prudential Financial | Visa vs. Applied Materials | Visa vs. New Oriental Education |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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