Correlation Between Applied Materials and Disco Corp
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Disco Corp 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 Disco Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Disco Corp ADR, you can compare the effects of market volatilities on Applied Materials and Disco Corp 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 Disco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Disco Corp.
Diversification Opportunities for Applied Materials and Disco Corp
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Applied and Disco is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Disco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disco Corp ADR 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 Disco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disco Corp ADR has no effect on the direction of Applied Materials i.e., Applied Materials and Disco Corp go up and down completely randomly.
Pair Corralation between Applied Materials and Disco Corp
Given the investment horizon of 90 days Applied Materials is expected to generate 2.36 times less return on investment than Disco Corp. But when comparing it to its historical volatility, Applied Materials is 1.31 times less risky than Disco Corp. It trades about 0.05 of its potential returns per unit of risk. Disco Corp ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,006 in Disco Corp ADR on October 25, 2024 and sell it today you would earn a total of 2,417 from holding Disco Corp ADR or generate 240.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Applied Materials vs. Disco Corp ADR
Performance |
| Timeline |
| Applied Materials |
| Disco Corp ADR |
Applied Materials and Disco Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Disco Corp
The main advantage of trading using opposite Applied Materials and Disco Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Disco Corp 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 Disco Corp will offset losses from the drop in Disco Corp's long position.| Applied Materials vs. Cohu Inc | Applied Materials vs. Entegris | Applied Materials vs. Kulicke and Soffa | Applied Materials vs. Photronics |
| Disco Corp vs. Asm Pacific Technology | Disco Corp vs. Tokyo Electron | Disco Corp vs. Lasertec | Disco Corp vs. Sumco Corp ADR |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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