Correlation Between Motorcar Parts and Applied Materials

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

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

Diversification Opportunities for Motorcar Parts and Applied Materials

-0.75

Correlation Coefficient

Motorcar Parts  Applied Materials

Pay attention - limited upside

The 3 months correlation between Motorcar and Applied is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Motorcar Parts 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 Motorcar Parts of 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 Motorcar Parts i.e., Motorcar Parts and Applied Materials go up and down completely randomly.

Pair Corralation between Motorcar Parts and Applied Materials

Assuming the 90 days horizon Motorcar Parts of is expected to generate 1.74 times more return on investment than Applied Materials. However, Motorcar Parts is 1.74 times more volatile than Applied Materials. It trades about 0.1 of its potential returns per unit of risk. Applied Materials is currently generating about -0.05 per unit of risk. If you would invest  780.00  in Motorcar Parts of on December 27, 2024 and sell it today you would earn a total of  190.00  from holding Motorcar Parts of or generate 24.36% return on investment over 90 days.

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

Motorcar Parts of  vs.  Applied Materials

Motorcar Parts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Motorcar Parts reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Motorcar Parts and Applied Materials

The main advantage of trading using opposite Motorcar Parts and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts 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 Motorcar Parts of 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.