Correlation Between Applied Materials and Superior Plus
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Superior Plus 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 Superior Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Superior Plus Corp, you can compare the effects of market volatilities on Applied Materials and Superior Plus 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 Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Superior Plus.
Diversification Opportunities for Applied Materials and Superior Plus
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Superior is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus 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 Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Applied Materials i.e., Applied Materials and Superior Plus go up and down completely randomly.
Pair Corralation between Applied Materials and Superior Plus
Assuming the 90 days horizon Applied Materials is expected to generate 1.18 times more return on investment than Superior Plus. However, Applied Materials is 1.18 times more volatile than Superior Plus Corp. It trades about 0.05 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.03 per unit of risk. If you would invest 10,807 in Applied Materials on November 19, 2024 and sell it today you would earn a total of 5,635 from holding Applied Materials or generate 52.14% 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. Superior Plus Corp
Performance |
| Timeline |
| Applied Materials |
| Superior Plus Corp |
Applied Materials and Superior Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Superior Plus
The main advantage of trading using opposite Applied Materials and Superior Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Superior Plus 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 Superior Plus will offset losses from the drop in Superior Plus' long position.| Applied Materials vs. Live Nation Entertainment | Applied Materials vs. United States Steel | Applied Materials vs. Fuji Media Holdings | Applied Materials vs. PENN Entertainment |
| Superior Plus vs. DEVRY EDUCATION GRP | Superior Plus vs. CHINA EDUCATION GROUP | Superior Plus vs. CAREER EDUCATION | Superior Plus vs. DeVry Education Group |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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