Correlation Between Applied Materials and Seche Environnement

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

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

Diversification Opportunities for Applied Materials and Seche Environnement

0.05

Correlation Coefficient

Applied Materials  Seche Environnement

Significant diversification

The 3 months correlation between Applied and Seche is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Seche Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seche Environnement and Applied Materials 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 Applied Materials are associated (or correlated) with Seche Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seche Environnement has no effect on the direction of Applied Materials i.e., Applied Materials and Seche Environnement go up and down completely randomly.

Pair Corralation between Applied Materials and Seche Environnement

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Seche Environnement. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 1.06 times less risky than Seche Environnement. The stock trades about -0.06 of its potential returns per unit of risk. The Seche Environnement SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,440  in Seche Environnement SA on December 23, 2024 and sell it today you would earn a total of  270.00  from holding Seche Environnement SA or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Applied Materials  vs.  Seche Environnement SA

Applied Materials

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Seche Environnement

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seche Environnement SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Seche Environnement is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Applied Materials and Seche Environnement

The main advantage of trading using opposite Applied Materials and Seche Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Seche Environnement 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 Seche Environnement will offset losses from the drop in Seche Environnement's long position.

The idea behind Applied Materials and Seche Environnement SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.