Correlation Between Applied Materials and Marstons PLC

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

By analyzing existing cross correlation between Applied Materials and Marstons PLC, you can compare the effects of market volatilities on Applied Materials and Marstons PLC 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Marstons PLC.

Diversification Opportunities for Applied Materials and Marstons PLC

-0.02

Correlation Coefficient

Applied Materials  Marstons PLC

Good diversification

The 3 months correlation between Applied and Marstons is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Applied Materials i.e., Applied Materials and Marstons PLC go up and down completely randomly.

Pair Corralation between Applied Materials and Marstons PLC

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Marstons PLC. In addition to that, Applied Materials is 1.74 times more volatile than Marstons PLC. It trades about -0.24 of its total potential returns per unit of risk. Marstons PLC is currently generating about 0.08 per unit of volatility. If you would invest  4,290  in Marstons PLC on October 5, 2024 and sell it today you would earn a total of  80.00  from holding Marstons PLC or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Applied Materials  vs.  Marstons PLC

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.

Marstons PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marstons PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Marstons PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Applied Materials and Marstons PLC

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

The idea behind Applied Materials and Marstons PLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..