Correlation Between Air Products and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Air Products and Applied Materials 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 Air Products and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and Applied Materials, you can compare the effects of market volatilities on Air Products and Applied Materials 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 Air Products with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Applied Materials.
Diversification Opportunities for Air Products and Applied Materials
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Applied is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Air Products 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 Air Products and are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Air Products i.e., Air Products and Applied Materials go up and down completely randomly.
Pair Corralation between Air Products and Applied Materials
Assuming the 90 days horizon Air Products and is expected to generate 0.72 times more return on investment than Applied Materials. However, Air Products and is 1.38 times less risky than Applied Materials. It trades about 0.09 of its potential returns per unit of risk. Applied Materials is currently generating about 0.03 per unit of risk. If you would invest 23,216 in Air Products and on August 29, 2024 and sell it today you would earn a total of 8,454 from holding Air Products and or generate 36.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. Applied Materials
Performance |
| Timeline |
| Air Products |
| Applied Materials |
Air Products and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Applied Materials
The main advantage of trading using opposite Air Products and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Air Products vs. Applied Materials | Air Products vs. HF FOODS GRP | Air Products vs. Charoen Pokphand Foods | Air Products vs. SANOK RUBBER ZY |
| Applied Materials vs. Lam Research | Applied Materials vs. KLA Corporation | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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