Correlation Between Applied Materials and Lasertec
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Lasertec 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 Lasertec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Lasertec, you can compare the effects of market volatilities on Applied Materials and Lasertec 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 Lasertec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Lasertec.
Diversification Opportunities for Applied Materials and Lasertec
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Lasertec is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Applied Materials i.e., Applied Materials and Lasertec go up and down completely randomly.
Pair Corralation between Applied Materials and Lasertec
Given the investment horizon of 90 days Applied Materials is expected to generate 0.62 times more return on investment than Lasertec. However, Applied Materials is 1.61 times less risky than Lasertec. It trades about 0.05 of its potential returns per unit of risk. Lasertec is currently generating about 0.01 per unit of risk. If you would invest 11,796 in Applied Materials on October 25, 2024 and sell it today you would earn a total of 7,270 from holding Applied Materials or generate 61.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Applied Materials vs. Lasertec
Performance |
| Timeline |
| Applied Materials |
| Lasertec |
Applied Materials and Lasertec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Lasertec
The main advantage of trading using opposite Applied Materials and Lasertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Lasertec 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 Lasertec will offset losses from the drop in Lasertec's long position.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| Lasertec vs. Sumco Corp ADR | Lasertec vs. Asm Pacific Technology | Lasertec vs. Disco Corp ADR | Lasertec vs. Tokyo Electron |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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