Correlation Between Renesas Electronics and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Renesas Electronics 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 Renesas Electronics and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renesas Electronics and Applied Materials, you can compare the effects of market volatilities on Renesas Electronics 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 Renesas Electronics with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renesas Electronics and Applied Materials.
Diversification Opportunities for Renesas Electronics and Applied Materials
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Renesas and Applied is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Renesas Electronics 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 Renesas Electronics 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 Renesas Electronics i.e., Renesas Electronics and Applied Materials go up and down completely randomly.
Pair Corralation between Renesas Electronics and Applied Materials
Assuming the 90 days horizon Renesas Electronics is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Renesas Electronics is 1.3 times less risky than Applied Materials. The stock trades about -0.02 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 16,758 in Applied Materials on September 4, 2024 and sell it today you would earn a total of 120.00 from holding Applied Materials or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Renesas Electronics vs. Applied Materials
Performance |
| Timeline |
| Renesas Electronics |
| Applied Materials |
Renesas Electronics and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Renesas Electronics and Applied Materials
The main advantage of trading using opposite Renesas Electronics and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics 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.| Renesas Electronics vs. NVIDIA | Renesas Electronics vs. Taiwan Semiconductor Manufacturing | Renesas Electronics vs. Advanced Micro Devices | Renesas Electronics vs. Intel |
| Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Lam Research |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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