Correlation Between WILLIS LEASE and Applied Materials
Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE 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 WILLIS LEASE and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WILLIS LEASE FIN and Applied Materials, you can compare the effects of market volatilities on WILLIS LEASE 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 WILLIS LEASE with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and Applied Materials.
Diversification Opportunities for WILLIS LEASE and Applied Materials
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between WILLIS and Applied is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Applied Materials go up and down completely randomly.
Pair Corralation between WILLIS LEASE and Applied Materials
Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, WILLIS LEASE FIN is 1.17 times less risky than Applied Materials. The stock trades about -0.07 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 15,844 in Applied Materials on October 27, 2024 and sell it today you would earn a total of 1,968 from holding Applied Materials or generate 12.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WILLIS LEASE FIN vs. Applied Materials
Performance |
| Timeline |
| WILLIS LEASE FIN |
| Applied Materials |
WILLIS LEASE and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WILLIS LEASE and Applied Materials
The main advantage of trading using opposite WILLIS LEASE and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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.| WILLIS LEASE vs. United Rentals | WILLIS LEASE vs. WillScot Mobile Mini | WILLIS LEASE vs. Avis Budget Group | WILLIS LEASE vs. ALD SA |
| Applied Materials vs. GAMING FAC SA | Applied Materials vs. GEAR4MUSIC LS 10 | Applied Materials vs. Boyd Gaming | Applied Materials vs. UNIVMUSIC GRPADR050 |
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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