Correlation Between Applied Materials and CVD Equipment
Can any of the company-specific risk be diversified away by investing in both Applied Materials and CVD Equipment 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 CVD Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and CVD Equipment, you can compare the effects of market volatilities on Applied Materials and CVD Equipment 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 CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and CVD Equipment.
Diversification Opportunities for Applied Materials and CVD Equipment
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Applied and CVD is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Applied Materials i.e., Applied Materials and CVD Equipment go up and down completely randomly.
Pair Corralation between Applied Materials and CVD Equipment
Given the investment horizon of 90 days Applied Materials is expected to under-perform the CVD Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 1.77 times less risky than CVD Equipment. The stock trades about -0.17 of its potential returns per unit of risk. The CVD Equipment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 307.00 in CVD Equipment on August 30, 2024 and sell it today you would lose (4.00) from holding CVD Equipment or give up 1.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. CVD Equipment
Performance |
| Timeline |
| Applied Materials |
| CVD Equipment |
Applied Materials and CVD Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and CVD Equipment
The main advantage of trading using opposite Applied Materials and CVD Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, CVD Equipment 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 CVD Equipment will offset losses from the drop in CVD Equipment's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| CVD Equipment vs. Standex International | CVD Equipment vs. Intevac | CVD Equipment vs. Thermon Group Holdings | CVD Equipment vs. Enpro Industries |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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