Correlation Between APPLIED MATERIALS and Adriatic Metals
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Adriatic Metals 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 Adriatic Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Adriatic Metals Plc, you can compare the effects of market volatilities on APPLIED MATERIALS and Adriatic Metals 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 Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Adriatic Metals.
Diversification Opportunities for APPLIED MATERIALS and Adriatic Metals
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APPLIED and Adriatic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Adriatic Metals go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Adriatic Metals
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.48 times less return on investment than Adriatic Metals. But when comparing it to its historical volatility, APPLIED MATERIALS is 1.44 times less risky than Adriatic Metals. It trades about 0.04 of its potential returns per unit of risk. Adriatic Metals Plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 202.00 in Adriatic Metals Plc on September 15, 2024 and sell it today you would earn a total of 42.00 from holding Adriatic Metals Plc or generate 20.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.27% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Adriatic Metals Plc
Performance |
| Timeline |
| APPLIED MATERIALS |
| Adriatic Metals Plc |
APPLIED MATERIALS and Adriatic Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Adriatic Metals
The main advantage of trading using opposite APPLIED MATERIALS and Adriatic Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Adriatic Metals 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 Adriatic Metals will offset losses from the drop in Adriatic Metals' long position.| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc |
| Adriatic Metals vs. Summit Materials | Adriatic Metals vs. Haier Smart Home | Adriatic Metals vs. Hyster Yale Materials Handling | Adriatic Metals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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