Correlation Between Applied Materials and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Alibaba Group 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 Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Alibaba Group Holding, you can compare the effects of market volatilities on Applied Materials and Alibaba Group 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Alibaba Group.
Diversification Opportunities for Applied Materials and Alibaba Group
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Alibaba is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Applied Materials i.e., Applied Materials and Alibaba Group go up and down completely randomly.
Pair Corralation between Applied Materials and Alibaba Group
Assuming the 90 days horizon Applied Materials is expected to generate 1.41 times less return on investment than Alibaba Group. In addition to that, Applied Materials is 1.0 times more volatile than Alibaba Group Holding. It trades about 0.03 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.04 per unit of volatility. If you would invest 841.00 in Alibaba Group Holding on September 20, 2024 and sell it today you would earn a total of 194.00 from holding Alibaba Group Holding or generate 23.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Alibaba Group Holding
Performance |
| Timeline |
| Applied Materials |
| Alibaba Group Holding |
Applied Materials and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Alibaba Group
The main advantage of trading using opposite Applied Materials and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Applied Materials vs. Tokyo Electron Limited | Applied Materials vs. Superior Plus Corp | Applied Materials vs. SIVERS SEMICONDUCTORS AB | Applied Materials vs. Norsk Hydro ASA |
| Alibaba Group vs. SANOK RUBBER ZY | Alibaba Group vs. Eidesvik Offshore ASA | Alibaba Group vs. FLOW TRADERS LTD | Alibaba Group vs. Applied Materials |
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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