Correlation Between Applied Materials and ASM International
Can any of the company-specific risk be diversified away by investing in both Applied Materials and ASM International 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 ASM International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and ASM International NV, you can compare the effects of market volatilities on Applied Materials and ASM International 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 ASM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and ASM International.
Diversification Opportunities for Applied Materials and ASM International
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and ASM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Applied Materials i.e., Applied Materials and ASM International go up and down completely randomly.
Pair Corralation between Applied Materials and ASM International
Assuming the 90 days horizon Applied Materials is expected to generate 1.19 times less return on investment than ASM International. But when comparing it to its historical volatility, Applied Materials is 1.08 times less risky than ASM International. It trades about 0.05 of its potential returns per unit of risk. ASM International NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 27,377 in ASM International NV on August 31, 2024 and sell it today you would earn a total of 22,453 from holding ASM International NV or generate 82.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. ASM International NV
Performance |
| Timeline |
| Applied Materials |
| ASM International |
Applied Materials and ASM International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and ASM International
The main advantage of trading using opposite Applied Materials and ASM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, ASM International 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 ASM International will offset losses from the drop in ASM International'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 |
| ASM International vs. Heartland Financial USA | ASM International vs. Commonwealth Bank of | ASM International vs. Vishay Intertechnology | ASM International vs. AECOM TECHNOLOGY |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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