Correlation Between Applied Materials and Lattice Semiconductor
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Lattice Semiconductor 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 Lattice Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Lattice Semiconductor, you can compare the effects of market volatilities on Applied Materials and Lattice Semiconductor 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 Lattice Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Lattice Semiconductor.
Diversification Opportunities for Applied Materials and Lattice Semiconductor
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Applied and Lattice is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Lattice Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lattice Semiconductor 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 Lattice Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lattice Semiconductor has no effect on the direction of Applied Materials i.e., Applied Materials and Lattice Semiconductor go up and down completely randomly.
Pair Corralation between Applied Materials and Lattice Semiconductor
Given the investment horizon of 90 days Applied Materials is expected to under-perform the Lattice Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 1.23 times less risky than Lattice Semiconductor. The stock trades about -0.09 of its potential returns per unit of risk. The Lattice Semiconductor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,455 in Lattice Semiconductor on August 28, 2024 and sell it today you would earn a total of 293.00 from holding Lattice Semiconductor or generate 5.37% 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. Lattice Semiconductor
Performance |
| Timeline |
| Applied Materials |
| Lattice Semiconductor |
Applied Materials and Lattice Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Lattice Semiconductor
The main advantage of trading using opposite Applied Materials and Lattice Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Lattice Semiconductor 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 Lattice Semiconductor will offset losses from the drop in Lattice Semiconductor'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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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