Correlation Between Alstria Office and Applied Materials

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

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

Diversification Opportunities for Alstria Office and Applied Materials

-0.74

Correlation Coefficient

Alstria Office  Applied Materials

Pay attention - limited upside

The 3 months correlation between Alstria and Applied is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding alstria office REIT AG and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Alstria Office 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 alstria office REIT AG 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 Alstria Office i.e., Alstria Office and Applied Materials go up and down completely randomly.

Pair Corralation between Alstria Office and Applied Materials

Assuming the 90 days trading horizon alstria office REIT AG is expected to generate 1.65 times more return on investment than Applied Materials. However, Alstria Office is 1.65 times more volatile than Applied Materials. It trades about 0.06 of its potential returns per unit of risk. Applied Materials is currently generating about 0.02 per unit of risk. If you would invest  334.00  in alstria office REIT AG on October 5, 2024 and sell it today you would earn a total of  197.00  from holding alstria office REIT AG or generate 58.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.25%
Values	Daily Returns

alstria office REIT AG  vs.  Applied Materials

alstria office REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days alstria office REIT AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Alstria Office is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 Alstria Office and Applied Materials

The main advantage of trading using opposite Alstria Office and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alstria Office 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 alstria office REIT AG 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.