Correlation Between APPLIED MATERIALS and General Mills
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and General Mills 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 General Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and General Mills, you can compare the effects of market volatilities on APPLIED MATERIALS and General Mills 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 General Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and General Mills.
Diversification Opportunities for APPLIED MATERIALS and General Mills
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APPLIED and General is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and General Mills go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and General Mills
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the General Mills. In addition to that, APPLIED MATERIALS is 1.5 times more volatile than General Mills. It trades about -0.11 of its total potential returns per unit of risk. General Mills is currently generating about -0.1 per unit of volatility. If you would invest 9,260 in General Mills on September 12, 2024 and sell it today you would lose (413.00) from holding General Mills or give up 4.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
APPLIED MATERIALS vs. General Mills
Performance |
| Timeline |
| APPLIED MATERIALS |
| General Mills |
APPLIED MATERIALS and General Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and General Mills
The main advantage of trading using opposite APPLIED MATERIALS and General Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, General Mills 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 General Mills will offset losses from the drop in General Mills' long position.| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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