Correlation Between Applied Materials and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Analog Devices 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 Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Analog Devices, you can compare the effects of market volatilities on Applied Materials and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Analog Devices.
Diversification Opportunities for Applied Materials and Analog Devices
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Analog is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Applied Materials i.e., Applied Materials and Analog Devices go up and down completely randomly.
Pair Corralation between Applied Materials and Analog Devices
Given the investment horizon of 90 days Applied Materials is expected to under-perform the Analog Devices. In addition to that, Applied Materials is 1.44 times more volatile than Analog Devices. It trades about -0.04 of its total potential returns per unit of risk. Analog Devices is currently generating about -0.02 per unit of volatility. If you would invest 23,258 in Analog Devices on August 29, 2024 and sell it today you would lose (1,541) from holding Analog Devices or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Analog Devices
Performance |
| Timeline |
| Applied Materials |
| Analog Devices |
Applied Materials and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Analog Devices
The main advantage of trading using opposite Applied Materials and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| Analog Devices vs. ABIVAX Socit Anonyme | Analog Devices vs. Morningstar Unconstrained Allocation | Analog Devices vs. SPACE | Analog Devices vs. Knife River |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |