Correlation Between Asm Pacific and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Asm Pacific 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 Asm Pacific and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asm Pacific Technology and Applied Materials, you can compare the effects of market volatilities on Asm Pacific 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 Asm Pacific with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asm Pacific and Applied Materials.
Diversification Opportunities for Asm Pacific and Applied Materials
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Asm and Applied is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Asm Pacific Technology and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Asm Pacific 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 Asm Pacific Technology 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 Asm Pacific i.e., Asm Pacific and Applied Materials go up and down completely randomly.
Pair Corralation between Asm Pacific and Applied Materials
Assuming the 90 days horizon Asm Pacific is expected to generate 1.84 times less return on investment than Applied Materials. In addition to that, Asm Pacific is 1.2 times more volatile than Applied Materials. It trades about 0.02 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.05 per unit of volatility. If you would invest 11,796 in Applied Materials on October 25, 2024 and sell it today you would earn a total of 7,270 from holding Applied Materials or generate 61.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Asm Pacific Technology vs. Applied Materials
Performance |
| Timeline |
| Asm Pacific Technology |
| Applied Materials |
Asm Pacific and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asm Pacific and Applied Materials
The main advantage of trading using opposite Asm Pacific and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asm Pacific 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.| Asm Pacific vs. Disco Corp ADR | Asm Pacific vs. Tokyo Electron | Asm Pacific vs. Lasertec | Asm Pacific vs. Sumco Corp ADR |
| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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