Correlation Between Zoetis and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Zoetis 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 Zoetis and APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zoetis Inc and APPLIED MATERIALS, you can compare the effects of market volatilities on Zoetis 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 Zoetis with a short position of APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoetis and APPLIED MATERIALS.
Diversification Opportunities for Zoetis and APPLIED MATERIALS
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Zoetis and APPLIED is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS and Zoetis 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 Zoetis Inc 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 Zoetis i.e., Zoetis and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Zoetis and APPLIED MATERIALS
Assuming the 90 days horizon Zoetis is expected to generate 2.62 times less return on investment than APPLIED MATERIALS. But when comparing it to its historical volatility, Zoetis Inc is 1.55 times less risky than APPLIED MATERIALS. It trades about 0.04 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,087 in APPLIED MATERIALS on September 12, 2024 and sell it today you would earn a total of 7,295 from holding APPLIED MATERIALS or generate 80.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zoetis Inc vs. APPLIED MATERIALS
Performance |
| Timeline |
| Zoetis Inc |
| APPLIED MATERIALS |
Zoetis and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zoetis and APPLIED MATERIALS
The main advantage of trading using opposite Zoetis and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoetis 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's long position.| Zoetis vs. Virtus Investment Partners | Zoetis vs. Carsales | Zoetis vs. RETAIL FOOD GROUP | Zoetis vs. FAST RETAIL ADR |
| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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