Correlation Between Vodafone Group and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Vodafone Group 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 Vodafone Group and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodafone Group PLC and Applied Materials, you can compare the effects of market volatilities on Vodafone Group 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 Vodafone Group with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and Applied Materials.
Diversification Opportunities for Vodafone Group and Applied Materials
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vodafone and Applied is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and Applied Materials go up and down completely randomly.
Pair Corralation between Vodafone Group and Applied Materials
Assuming the 90 days trading horizon Vodafone Group PLC is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Vodafone Group PLC is 2.94 times less risky than Applied Materials. The stock trades about -0.24 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 17,220 in Applied Materials on October 9, 2024 and sell it today you would earn a total of 737.00 from holding Applied Materials or generate 4.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vodafone Group PLC vs. Applied Materials
Performance |
| Timeline |
| Vodafone Group PLC |
| Applied Materials |
Vodafone Group and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodafone Group and Applied Materials
The main advantage of trading using opposite Vodafone Group and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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.| Vodafone Group vs. Blackrock World Mining | Vodafone Group vs. Various Eateries PLC | Vodafone Group vs. Cornish Metals | Vodafone Group vs. Westlake Chemical Corp |
| Applied Materials vs. JD Sports Fashion | Applied Materials vs. Catalyst Media Group | Applied Materials vs. Live Nation Entertainment | Applied Materials vs. Vitec Software Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |