Correlation Between Applied Materials and Enel SpA
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Enel SpA 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 Enel SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Enel SpA, you can compare the effects of market volatilities on Applied Materials and Enel SpA 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 Enel SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Enel SpA.
Diversification Opportunities for Applied Materials and Enel SpA
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Applied and Enel is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA 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 Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of Applied Materials i.e., Applied Materials and Enel SpA go up and down completely randomly.
Pair Corralation between Applied Materials and Enel SpA
Assuming the 90 days horizon Applied Materials is expected to generate 2.15 times more return on investment than Enel SpA. However, Applied Materials is 2.15 times more volatile than Enel SpA. It trades about 0.05 of its potential returns per unit of risk. Enel SpA is currently generating about 0.08 per unit of risk. If you would invest 10,596 in Applied Materials on September 3, 2024 and sell it today you would earn a total of 6,282 from holding Applied Materials or generate 59.29% 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. Enel SpA
Performance |
| Timeline |
| Applied Materials |
| Enel SpA |
Applied Materials and Enel SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Enel SpA
The main advantage of trading using opposite Applied Materials and Enel SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Enel SpA 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 Enel SpA will offset losses from the drop in Enel SpA's long position.| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Lam Research |
| Enel SpA vs. Pembina Pipeline Corp | Enel SpA vs. CN MODERN DAIRY | Enel SpA vs. American Eagle Outfitters | Enel SpA vs. Tyson Foods |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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