Correlation Between Applied Materials and Sekisui Chemical
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Sekisui Chemical 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 Sekisui Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Sekisui Chemical Co, you can compare the effects of market volatilities on Applied Materials and Sekisui Chemical 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 Sekisui Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Sekisui Chemical.
Diversification Opportunities for Applied Materials and Sekisui Chemical
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Sekisui is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of Applied Materials i.e., Applied Materials and Sekisui Chemical go up and down completely randomly.
Pair Corralation between Applied Materials and Sekisui Chemical
Assuming the 90 days horizon Applied Materials is expected to generate 2.5 times less return on investment than Sekisui Chemical. In addition to that, Applied Materials is 1.2 times more volatile than Sekisui Chemical Co. It trades about 0.07 of its total potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.21 per unit of volatility. If you would invest 1,370 in Sekisui Chemical Co on September 5, 2024 and sell it today you would earn a total of 160.00 from holding Sekisui Chemical Co or generate 11.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Sekisui Chemical Co
Performance |
| Timeline |
| Applied Materials |
| Sekisui Chemical |
Applied Materials and Sekisui Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Sekisui Chemical
The main advantage of trading using opposite Applied Materials and Sekisui Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Sekisui Chemical 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 Sekisui Chemical will offset losses from the drop in Sekisui Chemical's long position.| Applied Materials vs. Boyd Gaming | Applied Materials vs. Motorcar Parts of | Applied Materials vs. Penn National Gaming | Applied Materials vs. TROPHY GAMES DEV |
| Sekisui Chemical vs. Martin Marietta Materials | Sekisui Chemical vs. Mitsubishi Materials | Sekisui Chemical vs. EAGLE MATERIALS | Sekisui Chemical vs. Applied Materials |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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