Correlation Between Fair Oaks and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Fair Oaks 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 Fair Oaks and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fair Oaks Income and Applied Materials, you can compare the effects of market volatilities on Fair Oaks 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 Fair Oaks with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Oaks and Applied Materials.
Diversification Opportunities for Fair Oaks and Applied Materials
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fair and Applied is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fair Oaks Income and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Fair Oaks 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 Fair Oaks Income 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 Fair Oaks i.e., Fair Oaks and Applied Materials go up and down completely randomly.
Pair Corralation between Fair Oaks and Applied Materials
Assuming the 90 days trading horizon Fair Oaks is expected to generate 1.96 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Fair Oaks Income is 5.51 times less risky than Applied Materials. It trades about 0.13 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,698 in Applied Materials on September 3, 2024 and sell it today you would earn a total of 3,455 from holding Applied Materials or generate 23.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Fair Oaks Income vs. Applied Materials
Performance |
| Timeline |
| Fair Oaks Income |
| Applied Materials |
Fair Oaks and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fair Oaks and Applied Materials
The main advantage of trading using opposite Fair Oaks and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Oaks 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.| Fair Oaks vs. Toyota Motor Corp | Fair Oaks vs. SoftBank Group Corp | Fair Oaks vs. OTP Bank Nyrt | Fair Oaks vs. Las Vegas Sands |
| Applied Materials vs. SMA Solar Technology | Applied Materials vs. Arcticzymes Technologies ASA | Applied Materials vs. DXC Technology Co | Applied Materials vs. Waste Management |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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