Correlation Between Applied Materials and EBRO FOODS
Can any of the company-specific risk be diversified away by investing in both Applied Materials and EBRO FOODS 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 EBRO FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and EBRO FOODS, you can compare the effects of market volatilities on Applied Materials and EBRO FOODS 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 EBRO FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and EBRO FOODS.
Diversification Opportunities for Applied Materials and EBRO FOODS
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Applied and EBRO is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and EBRO FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBRO FOODS 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 EBRO FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBRO FOODS has no effect on the direction of Applied Materials i.e., Applied Materials and EBRO FOODS go up and down completely randomly.
Pair Corralation between Applied Materials and EBRO FOODS
Assuming the 90 days horizon Applied Materials is expected to generate 3.23 times more return on investment than EBRO FOODS. However, Applied Materials is 3.23 times more volatile than EBRO FOODS. It trades about 0.15 of its potential returns per unit of risk. EBRO FOODS is currently generating about 0.03 per unit of risk. If you would invest 15,952 in Applied Materials on November 2, 2024 and sell it today you would earn a total of 1,528 from holding Applied Materials or generate 9.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. EBRO FOODS
Performance |
| Timeline |
| Applied Materials |
| EBRO FOODS |
Applied Materials and EBRO FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and EBRO FOODS
The main advantage of trading using opposite Applied Materials and EBRO FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, EBRO FOODS 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 EBRO FOODS will offset losses from the drop in EBRO FOODS's long position.| Applied Materials vs. HEALTHSTREAM | Applied Materials vs. ARDAGH METAL PACDL 0001 | Applied Materials vs. CLOVER HEALTH INV | Applied Materials vs. GREENX METALS LTD |
| EBRO FOODS vs. STRAYER EDUCATION | EBRO FOODS vs. Perdoceo Education | EBRO FOODS vs. Television Broadcasts Limited | EBRO FOODS vs. DEVRY EDUCATION GRP |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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