Correlation Between Air Transport and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Transport 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 Transport Services and Applied Materials, you can compare the effects of market volatilities on Air Transport 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 Transport with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Applied Materials.
Diversification Opportunities for Air Transport and Applied Materials
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Applied is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Air Transport 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 Transport Services 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 Transport i.e., Air Transport and Applied Materials go up and down completely randomly.
Pair Corralation between Air Transport and Applied Materials
Assuming the 90 days horizon Air Transport Services is expected to generate 1.77 times more return on investment than Applied Materials. However, Air Transport is 1.77 times more volatile than Applied Materials. It trades about 0.24 of its potential returns per unit of risk. Applied Materials is currently generating about -0.07 per unit of risk. If you would invest 1,610 in Air Transport Services on August 31, 2024 and sell it today you would earn a total of 470.00 from holding Air Transport Services or generate 29.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Applied Materials
Performance |
| Timeline |
| Air Transport Services |
| Applied Materials |
Air Transport and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Applied Materials
The main advantage of trading using opposite Air Transport and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Transport vs. AENA SME UNSPADR110 | Air Transport vs. Superior Plus Corp | Air Transport vs. NMI Holdings | Air Transport vs. Origin Agritech |
| Applied Materials vs. ASML Holding NV | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings | Applied Materials vs. Origin Agritech |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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