Correlation Between Applied Materials and Erste Group
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Erste Group 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 Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Erste Group Bank, you can compare the effects of market volatilities on Applied Materials and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Erste Group.
Diversification Opportunities for Applied Materials and Erste Group
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Applied and Erste is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Applied Materials i.e., Applied Materials and Erste Group go up and down completely randomly.
Pair Corralation between Applied Materials and Erste Group
Assuming the 90 days horizon Applied Materials is expected to generate 1.14 times less return on investment than Erste Group. In addition to that, Applied Materials is 1.58 times more volatile than Erste Group Bank. It trades about 0.06 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.1 per unit of volatility. If you would invest 2,982 in Erste Group Bank on October 16, 2024 and sell it today you would earn a total of 3,036 from holding Erste Group Bank or generate 101.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.6% |
| Values | Daily Returns |
Applied Materials vs. Erste Group Bank
Performance |
| Timeline |
| Applied Materials |
| Erste Group Bank |
Applied Materials and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Erste Group
The main advantage of trading using opposite Applied Materials and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| Applied Materials vs. LOANDEPOT INC A | Applied Materials vs. FUYO GENERAL LEASE | Applied Materials vs. DeVry Education Group | Applied Materials vs. TAL Education Group |
| Erste Group vs. Sch Environnement SA | Erste Group vs. Lifeway Foods | Erste Group vs. EBRO FOODS | Erste Group vs. INDOFOOD AGRI RES |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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