Correlation Between Applied Materials and FTC Solar
Can any of the company-specific risk be diversified away by investing in both Applied Materials and FTC Solar 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 FTC Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and FTC Solar, you can compare the effects of market volatilities on Applied Materials and FTC Solar 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 FTC Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and FTC Solar.
Diversification Opportunities for Applied Materials and FTC Solar
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and FTC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and FTC Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTC Solar 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 FTC Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTC Solar has no effect on the direction of Applied Materials i.e., Applied Materials and FTC Solar go up and down completely randomly.
Pair Corralation between Applied Materials and FTC Solar
Given the investment horizon of 90 days Applied Materials is expected to under-perform the FTC Solar. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 5.22 times less risky than FTC Solar. The stock trades about -0.04 of its potential returns per unit of risk. The FTC Solar is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 24.00 in FTC Solar on August 28, 2024 and sell it today you would earn a total of 14.00 from holding FTC Solar or generate 58.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. FTC Solar
Performance |
| Timeline |
| Applied Materials |
| FTC Solar |
Applied Materials and FTC Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and FTC Solar
The main advantage of trading using opposite Applied Materials and FTC Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, FTC Solar 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 FTC Solar will offset losses from the drop in FTC Solar's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 Stocks Directory module to find actively traded stocks across global markets.
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