Correlation Between Apple and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and APPLIED MATERIALS, you can compare the effects of market volatilities on Apple 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 Apple with a short position of APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and APPLIED MATERIALS.
Diversification Opportunities for Apple and APPLIED MATERIALS
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Apple and APPLIED is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS and Apple 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 Apple Inc 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 Apple i.e., Apple and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Apple and APPLIED MATERIALS
Assuming the 90 days trading horizon Apple is expected to generate 1.15 times less return on investment than APPLIED MATERIALS. But when comparing it to its historical volatility, Apple Inc is 1.76 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 0.06 of returns per unit of risk over similar time horizon. If you would invest 12,255 in APPLIED MATERIALS on August 25, 2024 and sell it today you would earn a total of 4,537 from holding APPLIED MATERIALS or generate 37.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.64% |
| Values | Daily Returns |
Apple Inc vs. APPLIED MATERIALS
Performance |
| Timeline |
| Apple Inc |
| APPLIED MATERIALS |
Apple and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and APPLIED MATERIALS
The main advantage of trading using opposite Apple and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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's long position.| Apple vs. Perdoceo Education | Apple vs. UNITED UTILITIES GR | Apple vs. Federal Agricultural Mortgage | Apple vs. North American Construction |
| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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