Correlation Between APPLIED MATERIALS and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Canadian Utilities 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 Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Canadian Utilities Limited, you can compare the effects of market volatilities on APPLIED MATERIALS and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Canadian Utilities.
Diversification Opportunities for APPLIED MATERIALS and Canadian Utilities
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APPLIED and Canadian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Canadian Utilities go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Canadian Utilities
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 2.89 times more return on investment than Canadian Utilities. However, APPLIED MATERIALS is 2.89 times more volatile than Canadian Utilities Limited. It trades about 0.01 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.16 per unit of risk. If you would invest 16,532 in APPLIED MATERIALS on October 30, 2024 and sell it today you would lose (114.00) from holding APPLIED MATERIALS or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Canadian Utilities Limited
Performance |
| Timeline |
| APPLIED MATERIALS |
| Canadian Utilities |
APPLIED MATERIALS and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Canadian Utilities
The main advantage of trading using opposite APPLIED MATERIALS and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| APPLIED MATERIALS vs. TRI CHEMICAL LABORATINC | APPLIED MATERIALS vs. Quaker Chemical | APPLIED MATERIALS vs. SEKISUI CHEMICAL | APPLIED MATERIALS vs. KINGBOARD CHEMICAL |
| Canadian Utilities vs. Universal Entertainment | Canadian Utilities vs. NAKED WINES PLC | Canadian Utilities vs. Nexstar Media Group | Canadian Utilities vs. PLAYMATES TOYS |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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