Correlation Between APPLIED MATERIALS and Bank of America
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Verizon Communications, you can compare the effects of market volatilities on APPLIED MATERIALS and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Bank of America.
Diversification Opportunities for APPLIED MATERIALS and Bank of America
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between APPLIED and Bank is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Bank of America go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Bank of America
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 25.59 times less return on investment than Bank of America. In addition to that, APPLIED MATERIALS is 2.34 times more volatile than Verizon Communications. It trades about 0.01 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.33 per unit of volatility. If you would invest 3,858 in Verizon Communications on September 1, 2024 and sell it today you would earn a total of 342.00 from holding Verizon Communications or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Verizon Communications
Performance |
| Timeline |
| APPLIED MATERIALS |
| Verizon Communications |
APPLIED MATERIALS and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Bank of America
The main advantage of trading using opposite APPLIED MATERIALS and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| APPLIED MATERIALS vs. QBE Insurance Group | APPLIED MATERIALS vs. Selective Insurance Group | APPLIED MATERIALS vs. Singapore Reinsurance | APPLIED MATERIALS vs. United Natural Foods |
| Bank of America vs. Direct Line Insurance | Bank of America vs. Harmony Gold Mining | Bank of America vs. The Hanover Insurance | Bank of America vs. Jacquet Metal Service |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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