Correlation Between Applied Materials and Eidesvik Offshore
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Eidesvik Offshore 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 Eidesvik Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Eidesvik Offshore ASA, you can compare the effects of market volatilities on Applied Materials and Eidesvik Offshore 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 Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Eidesvik Offshore.
Diversification Opportunities for Applied Materials and Eidesvik Offshore
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Eidesvik is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA 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 Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of Applied Materials i.e., Applied Materials and Eidesvik Offshore go up and down completely randomly.
Pair Corralation between Applied Materials and Eidesvik Offshore
Assuming the 90 days horizon Applied Materials is expected to generate 2.06 times more return on investment than Eidesvik Offshore. However, Applied Materials is 2.06 times more volatile than Eidesvik Offshore ASA. It trades about 0.1 of its potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.19 per unit of risk. If you would invest 15,828 in Applied Materials on September 20, 2024 and sell it today you would earn a total of 772.00 from holding Applied Materials or generate 4.88% 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. Eidesvik Offshore ASA
Performance |
| Timeline |
| Applied Materials |
| Eidesvik Offshore ASA |
Applied Materials and Eidesvik Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Eidesvik Offshore
The main advantage of trading using opposite Applied Materials and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Eidesvik Offshore 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 Eidesvik Offshore will offset losses from the drop in Eidesvik Offshore'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 |
| Eidesvik Offshore vs. Ryanair Holdings plc | Eidesvik Offshore vs. IMAGIN MEDICAL INC | Eidesvik Offshore vs. Westinghouse Air Brake | Eidesvik Offshore vs. MEDICAL FACILITIES NEW |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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