Correlation Between Applied Materials and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Applied Materials and APPLIED MATERIALS 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 APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and APPLIED MATERIALS, you can compare the effects of market volatilities on Applied Materials and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and APPLIED MATERIALS.
Diversification Opportunities for Applied Materials and APPLIED MATERIALS
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Applied and APPLIED is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of Applied Materials i.e., Applied Materials and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Applied Materials and APPLIED MATERIALS
Assuming the 90 days horizon Applied Materials is expected to under-perform the APPLIED MATERIALS. In addition to that, Applied Materials is 1.12 times more volatile than APPLIED MATERIALS. It trades about -0.07 of its total potential returns per unit of risk. APPLIED MATERIALS is currently generating about -0.03 per unit of volatility. If you would invest 16,986 in APPLIED MATERIALS on August 31, 2024 and sell it today you would lose (468.00) from holding APPLIED MATERIALS or give up 2.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. APPLIED MATERIALS
Performance |
| Timeline |
| Applied Materials |
| APPLIED MATERIALS |
Applied Materials and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and APPLIED MATERIALS
The main advantage of trading using opposite Applied Materials and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.| Applied Materials vs. ASML Holding NV | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings | Applied Materials vs. Origin Agritech |
| APPLIED MATERIALS vs. Goodyear Tire Rubber | APPLIED MATERIALS vs. Entravision Communications | APPLIED MATERIALS vs. SBA Communications Corp | APPLIED MATERIALS vs. Ribbon Communications |
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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