Correlation Between APPLIED MATERIALS and Zoetis
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Zoetis 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 Zoetis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Zoetis Inc, you can compare the effects of market volatilities on APPLIED MATERIALS and Zoetis 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 Zoetis. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Zoetis.
Diversification Opportunities for APPLIED MATERIALS and Zoetis
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between APPLIED and Zoetis is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Zoetis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoetis Inc 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 Zoetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoetis Inc has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Zoetis go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Zoetis
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.55 times more return on investment than Zoetis. However, APPLIED MATERIALS is 1.55 times more volatile than Zoetis Inc. It trades about 0.06 of its potential returns per unit of risk. Zoetis Inc is currently generating about 0.04 per unit of risk. If you would invest 9,087 in APPLIED MATERIALS on September 12, 2024 and sell it today you would earn a total of 7,295 from holding APPLIED MATERIALS or generate 80.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Zoetis Inc
Performance |
| Timeline |
| APPLIED MATERIALS |
| Zoetis Inc |
APPLIED MATERIALS and Zoetis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Zoetis
The main advantage of trading using opposite APPLIED MATERIALS and Zoetis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Zoetis 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 Zoetis will offset losses from the drop in Zoetis' 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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