Correlation Between APPLIED MATERIALS and Summit Materials
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Summit Materials 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 Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Summit Materials, you can compare the effects of market volatilities on APPLIED MATERIALS and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Summit Materials.
Diversification Opportunities for APPLIED MATERIALS and Summit Materials
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APPLIED and Summit is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Summit Materials go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Summit Materials
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.1 times more return on investment than Summit Materials. However, APPLIED MATERIALS is 1.1 times more volatile than Summit Materials. It trades about 0.05 of its potential returns per unit of risk. Summit Materials is currently generating about 0.06 per unit of risk. If you would invest 10,054 in APPLIED MATERIALS on September 3, 2024 and sell it today you would earn a total of 6,478 from holding APPLIED MATERIALS or generate 64.43% 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. Summit Materials
Performance |
| Timeline |
| APPLIED MATERIALS |
| Summit Materials |
APPLIED MATERIALS and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Summit Materials
The main advantage of trading using opposite APPLIED MATERIALS and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| APPLIED MATERIALS vs. BJs Wholesale Club | APPLIED MATERIALS vs. United Internet AG | APPLIED MATERIALS vs. Entravision Communications | APPLIED MATERIALS vs. Cogent Communications Holdings |
| Summit Materials vs. KIMBALL ELECTRONICS | Summit Materials vs. AOI Electronics Co | Summit Materials vs. LION ONE METALS | Summit Materials vs. Perseus Mining Limited |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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