Correlation Between Grupo Sports and Applied Materials

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Can any of the company-specific risk be diversified away by investing in both Grupo Sports 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 Grupo Sports and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Sports World and Applied Materials, you can compare the effects of market volatilities on Grupo Sports 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 Grupo Sports with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Sports and Applied Materials.

Diversification Opportunities for Grupo Sports and Applied Materials

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Grupo and Applied is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Grupo Sports 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 Grupo Sports World 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 Grupo Sports i.e., Grupo Sports and Applied Materials go up and down completely randomly.

Pair Corralation between Grupo Sports and Applied Materials

Assuming the 90 days trading horizon Grupo Sports World is expected to generate 0.63 times more return on investment than Applied Materials. However, Grupo Sports World is 1.58 times less risky than Applied Materials. It trades about 0.12 of its potential returns per unit of risk. Applied Materials is currently generating about 0.02 per unit of risk. If you would invest  525.00  in Grupo Sports World on November 2, 2024 and sell it today you would earn a total of  105.00  from holding Grupo Sports World or generate 20.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Grupo Sports World  vs.  Applied Materials

 Performance 
       Timeline  
Grupo Sports World 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Grupo Sports World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Applied Materials 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Applied Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Sports and Applied Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grupo Sports and Applied Materials

The main advantage of trading using opposite Grupo Sports and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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.
The idea behind Grupo Sports World and Applied Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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