Correlation Between APPLIED MATERIALS and MTI WIRELESS
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and MTI WIRELESS 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 MTI WIRELESS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and MTI WIRELESS EDGE, you can compare the effects of market volatilities on APPLIED MATERIALS and MTI WIRELESS 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 MTI WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and MTI WIRELESS.
Diversification Opportunities for APPLIED MATERIALS and MTI WIRELESS
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between APPLIED and MTI is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and MTI WIRELESS EDGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI WIRELESS EDGE 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 MTI WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI WIRELESS EDGE has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and MTI WIRELESS go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and MTI WIRELESS
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.05 times more return on investment than MTI WIRELESS. However, APPLIED MATERIALS is 1.05 times more volatile than MTI WIRELESS EDGE. It trades about -0.03 of its potential returns per unit of risk. MTI WIRELESS EDGE is currently generating about -0.13 per unit of risk. If you would invest 16,986 in APPLIED MATERIALS on August 31, 2024 and sell it today you would lose (468.00) from holding APPLIED MATERIALS or give up 2.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. MTI WIRELESS EDGE
Performance |
| Timeline |
| APPLIED MATERIALS |
| MTI WIRELESS EDGE |
APPLIED MATERIALS and MTI WIRELESS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and MTI WIRELESS
The main advantage of trading using opposite APPLIED MATERIALS and MTI WIRELESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, MTI WIRELESS 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 MTI WIRELESS will offset losses from the drop in MTI WIRELESS's long position.| APPLIED MATERIALS vs. Goodyear Tire Rubber | APPLIED MATERIALS vs. Entravision Communications | APPLIED MATERIALS vs. SBA Communications Corp | APPLIED MATERIALS vs. Ribbon Communications |
| MTI WIRELESS vs. Apple Inc | MTI WIRELESS vs. Apple Inc | MTI WIRELESS vs. Apple Inc | MTI WIRELESS vs. Apple Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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