Correlation Between Séché Environnement and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Séché Environnement 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 Séché Environnement and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sch Environnement SA and Applied Materials, you can compare the effects of market volatilities on Séché Environnement 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 Séché Environnement with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Séché Environnement and Applied Materials.
Diversification Opportunities for Séché Environnement and Applied Materials
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Séché and Applied is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sch Environnement SA and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Séché Environnement 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 Sch Environnement SA 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 Séché Environnement i.e., Séché Environnement and Applied Materials go up and down completely randomly.
Pair Corralation between Séché Environnement and Applied Materials
Assuming the 90 days horizon Sch Environnement SA is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Sch Environnement SA is 1.31 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 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,069 in Applied Materials on October 13, 2024 and sell it today you would earn a total of 7,123 from holding Applied Materials or generate 70.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sch Environnement SA vs. Applied Materials
Performance |
| Timeline |
| Séché Environnement |
| Applied Materials |
Séché Environnement and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Séché Environnement and Applied Materials
The main advantage of trading using opposite Séché Environnement and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Séché Environnement 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.| Séché Environnement vs. EAGLE MATERIALS | Séché Environnement vs. Applied Materials | Séché Environnement vs. VULCAN MATERIALS | Séché Environnement vs. SILVER BULLET DATA |
| Applied Materials vs. Southwest Airlines Co | Applied Materials vs. USU Software AG | Applied Materials vs. SINGAPORE AIRLINES | Applied Materials vs. AEGEAN AIRLINES |
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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