Correlation Between Astar and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Astar 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 Astar and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astar and Applied Materials, you can compare the effects of market volatilities on Astar 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 Astar with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Applied Materials.
Diversification Opportunities for Astar and Applied Materials
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Astar and Applied is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Astar 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 Astar 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 Astar i.e., Astar and Applied Materials go up and down completely randomly.
Pair Corralation between Astar and Applied Materials
Assuming the 90 days trading horizon Astar is expected to generate 3.87 times less return on investment than Applied Materials. In addition to that, Astar is 2.29 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 0.15 per unit of volatility. If you would invest 16,099 in Applied Materials on October 19, 2024 and sell it today you would earn a total of 2,421 from holding Applied Materials or generate 15.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Astar vs. Applied Materials
Performance |
| Timeline |
| Astar |
| Applied Materials |
Astar and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astar and Applied Materials
The main advantage of trading using opposite Astar and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar 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.The idea behind Astar and Applied Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Applied Materials vs. EAGLE MATERIALS | Applied Materials vs. BOS BETTER ONLINE | Applied Materials vs. Plastic Omnium | Applied Materials vs. Gruppo Mutuionline SpA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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