Correlation Between China Merchants and Applied Materials
Can any of the company-specific risk be diversified away by investing in both China Merchants 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 China Merchants and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Merchants Port and Applied Materials, you can compare the effects of market volatilities on China Merchants 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 China Merchants with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Applied Materials.
Diversification Opportunities for China Merchants and Applied Materials
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Applied is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Port and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and China Merchants 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 China Merchants Port 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 China Merchants i.e., China Merchants and Applied Materials go up and down completely randomly.
Pair Corralation between China Merchants and Applied Materials
Assuming the 90 days horizon China Merchants Port is expected to generate 0.48 times more return on investment than Applied Materials. However, China Merchants Port is 2.09 times less risky than Applied Materials. It trades about 0.15 of its potential returns per unit of risk. Applied Materials is currently generating about -0.13 per unit of risk. If you would invest 148.00 in China Merchants Port on September 12, 2024 and sell it today you would earn a total of 7.00 from holding China Merchants Port or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Port vs. Applied Materials
Performance |
| Timeline |
| China Merchants Port |
| Applied Materials |
China Merchants and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Applied Materials
The main advantage of trading using opposite China Merchants and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants 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.| China Merchants vs. Guidewire Software | China Merchants vs. United States Steel | China Merchants vs. MAGIC SOFTWARE ENTR | China Merchants vs. UPDATE SOFTWARE |
| Applied Materials vs. Tokyo Electron Limited | Applied Materials vs. Superior Plus Corp | Applied Materials vs. SIVERS SEMICONDUCTORS AB | Applied Materials vs. Norsk Hydro ASA |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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