Correlation Between Applied Materials and SemiLEDS
Can any of the company-specific risk be diversified away by investing in both Applied Materials and SemiLEDS 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 SemiLEDS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and SemiLEDS, you can compare the effects of market volatilities on Applied Materials and SemiLEDS 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 SemiLEDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and SemiLEDS.
Diversification Opportunities for Applied Materials and SemiLEDS
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and SemiLEDS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and SemiLEDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SemiLEDS 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 SemiLEDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SemiLEDS has no effect on the direction of Applied Materials i.e., Applied Materials and SemiLEDS go up and down completely randomly.
Pair Corralation between Applied Materials and SemiLEDS
Given the investment horizon of 90 days Applied Materials is expected to under-perform the SemiLEDS. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 3.72 times less risky than SemiLEDS. The stock trades about -0.12 of its potential returns per unit of risk. The SemiLEDS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 124.00 in SemiLEDS on August 31, 2024 and sell it today you would earn a total of 4.00 from holding SemiLEDS or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. SemiLEDS
Performance |
| Timeline |
| Applied Materials |
| SemiLEDS |
Applied Materials and SemiLEDS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and SemiLEDS
The main advantage of trading using opposite Applied Materials and SemiLEDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, SemiLEDS 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 SemiLEDS will offset losses from the drop in SemiLEDS's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| SemiLEDS vs. Wisekey International Holding | SemiLEDS vs. GSI Technology | SemiLEDS vs. SEALSQ Corp | SemiLEDS vs. WiSA Technologies |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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