Correlation Between OTP Bank and Applied Materials

Can any of the company-specific risk be diversified away by investing in both OTP Bank 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 OTP Bank and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OTP Bank Nyrt and Applied Materials, you can compare the effects of market volatilities on OTP Bank 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 OTP Bank with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of OTP Bank and Applied Materials.

Diversification Opportunities for OTP Bank and Applied Materials

-0.01

Correlation Coefficient

OTP Bank  Applied Materials

Good diversification

The 3 months correlation between OTP and Applied is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and OTP Bank 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 OTP Bank Nyrt 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 OTP Bank i.e., OTP Bank and Applied Materials go up and down completely randomly.

Pair Corralation between OTP Bank and Applied Materials

Assuming the 90 days trading horizon OTP Bank Nyrt is expected to generate 2.5 times more return on investment than Applied Materials. However, OTP Bank is 2.5 times more volatile than Applied Materials. It trades about 0.03 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 per unit of risk. If you would invest  1,176,324  in OTP Bank Nyrt on October 5, 2024 and sell it today you would earn a total of  82,676  from holding OTP Bank Nyrt or generate 7.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

OTP Bank Nyrt  vs.  Applied Materials

OTP Bank Nyrt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, OTP Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with OTP Bank and Applied Materials

The main advantage of trading using opposite OTP Bank and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank 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 OTP Bank Nyrt 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .