Correlation Between Investment and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Investment 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 Investment and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Investment and Applied Materials, you can compare the effects of market volatilities on Investment 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 Investment with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and Applied Materials.
Diversification Opportunities for Investment and Applied Materials
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Investment and Applied is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding The Investment and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Investment 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 The Investment 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 Investment i.e., Investment and Applied Materials go up and down completely randomly.
Pair Corralation between Investment and Applied Materials
Assuming the 90 days trading horizon The Investment is expected to generate 0.2 times more return on investment than Applied Materials. However, The Investment is 4.92 times less risky than Applied Materials. It trades about 0.08 of its potential returns per unit of risk. Applied Materials is currently generating about -0.06 per unit of risk. If you would invest 36,600 in The Investment on August 31, 2024 and sell it today you would earn a total of 1,000.00 from holding The Investment or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Investment vs. Applied Materials
Performance |
| Timeline |
| Investment |
| Applied Materials |
Investment and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and Applied Materials
The main advantage of trading using opposite Investment and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment 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.| Investment vs. Associated British Foods | Investment vs. United States Steel | Investment vs. Premier Foods PLC | Investment vs. Axfood AB |
| Applied Materials vs. Hochschild Mining plc | Applied Materials vs. Check Point Software | Applied Materials vs. Accsys Technologies PLC | Applied Materials vs. Gaming Realms plc |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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