Correlation Between HERBALIFE and Applied Materials
Can any of the company-specific risk be diversified away by investing in both HERBALIFE 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 HERBALIFE and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HERBALIFE and Applied Materials, you can compare the effects of market volatilities on HERBALIFE 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 HERBALIFE with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of HERBALIFE and Applied Materials.
Diversification Opportunities for HERBALIFE and Applied Materials
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HERBALIFE and Applied is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding HERBALIFE and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and HERBALIFE 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 HERBALIFE 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 HERBALIFE i.e., HERBALIFE and Applied Materials go up and down completely randomly.
Pair Corralation between HERBALIFE and Applied Materials
Assuming the 90 days trading horizon HERBALIFE is expected to generate 1.38 times more return on investment than Applied Materials. However, HERBALIFE is 1.38 times more volatile than Applied Materials. It trades about 0.14 of its potential returns per unit of risk. Applied Materials is currently generating about 0.04 per unit of risk. If you would invest 673.00 in HERBALIFE on September 1, 2024 and sell it today you would earn a total of 82.00 from holding HERBALIFE or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
HERBALIFE vs. Applied Materials
Performance |
| Timeline |
| HERBALIFE |
| Applied Materials |
HERBALIFE and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HERBALIFE and Applied Materials
The main advantage of trading using opposite HERBALIFE and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HERBALIFE 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.| HERBALIFE vs. Applied Materials | HERBALIFE vs. Compagnie Plastic Omnium | HERBALIFE vs. Goodyear Tire Rubber | HERBALIFE vs. Vastned Retail NV |
| Applied Materials vs. National Beverage Corp | Applied Materials vs. Austevoll Seafood ASA | Applied Materials vs. DICKER DATA LTD | Applied Materials vs. PUBLIC STORAGE PRFO |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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