Correlation Between Applied Materials and ASE Industrial
Can any of the company-specific risk be diversified away by investing in both Applied Materials and ASE Industrial 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 ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and ASE Industrial Holding, you can compare the effects of market volatilities on Applied Materials and ASE Industrial 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 ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and ASE Industrial.
Diversification Opportunities for Applied Materials and ASE Industrial
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Applied and ASE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Applied Materials i.e., Applied Materials and ASE Industrial go up and down completely randomly.
Pair Corralation between Applied Materials and ASE Industrial
Given the investment horizon of 90 days Applied Materials is expected to generate 1.15 times more return on investment than ASE Industrial. However, Applied Materials is 1.15 times more volatile than ASE Industrial Holding. It trades about 0.04 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.04 per unit of risk. If you would invest 13,456 in Applied Materials on August 31, 2024 and sell it today you would earn a total of 4,015 from holding Applied Materials or generate 29.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. ASE Industrial Holding
Performance |
| Timeline |
| Applied Materials |
| ASE Industrial Holding |
Applied Materials and ASE Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and ASE Industrial
The main advantage of trading using opposite Applied Materials and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| ASE Industrial vs. United Microelectronics | ASE Industrial vs. Amkor Technology | ASE Industrial vs. Himax Technologies | ASE Industrial vs. Chunghwa Telecom Co |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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