Correlation Between APPLIED MATERIALS and VIVA WINE

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Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and VIVA WINE 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 VIVA WINE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and VIVA WINE GROUP, you can compare the effects of market volatilities on APPLIED MATERIALS and VIVA WINE 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 VIVA WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and VIVA WINE.

Diversification Opportunities for APPLIED MATERIALS and VIVA WINE

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between APPLIED and VIVA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and VIVA WINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIVA WINE GROUP 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 VIVA WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIVA WINE GROUP has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and VIVA WINE go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and VIVA WINE

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.81 times more return on investment than VIVA WINE. However, APPLIED MATERIALS is 1.81 times more volatile than VIVA WINE GROUP. It trades about 0.01 of its potential returns per unit of risk. VIVA WINE GROUP is currently generating about -0.23 per unit of risk. If you would invest  16,605  in APPLIED MATERIALS on September 1, 2024 and sell it today you would lose (73.00) from holding APPLIED MATERIALS or give up 0.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

APPLIED MATERIALS  vs.  VIVA WINE GROUP

 Performance 
       Timeline  
APPLIED MATERIALS 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
VIVA WINE GROUP 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days VIVA WINE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

APPLIED MATERIALS and VIVA WINE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with APPLIED MATERIALS and VIVA WINE

The main advantage of trading using opposite APPLIED MATERIALS and VIVA WINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, VIVA WINE 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 VIVA WINE will offset losses from the drop in VIVA WINE's long position.
The idea behind APPLIED MATERIALS and VIVA WINE GROUP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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