Correlation Between Applied Materials and National Beverage
Can any of the company-specific risk be diversified away by investing in both Applied Materials and National Beverage 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 National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and National Beverage Corp, you can compare the effects of market volatilities on Applied Materials and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and National Beverage.
Diversification Opportunities for Applied Materials and National Beverage
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and National is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Applied Materials i.e., Applied Materials and National Beverage go up and down completely randomly.
Pair Corralation between Applied Materials and National Beverage
Assuming the 90 days horizon Applied Materials is expected to generate 4.81 times less return on investment than National Beverage. In addition to that, Applied Materials is 1.66 times more volatile than National Beverage Corp. It trades about 0.02 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.15 per unit of volatility. If you would invest 4,040 in National Beverage Corp on September 3, 2024 and sell it today you would earn a total of 620.00 from holding National Beverage Corp or generate 15.35% 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. National Beverage Corp
Performance |
| Timeline |
| Applied Materials |
| National Beverage Corp |
Applied Materials and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and National Beverage
The main advantage of trading using opposite Applied Materials and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Lam Research |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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