Correlation Between Applied Materials, and Pure Storage,

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

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

Diversification Opportunities for Applied Materials, and Pure Storage,

0.04

Correlation Coefficient

Applied Materials,  Pure Storage,

Significant diversification

The 3 months correlation between Applied and Pure is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Pure Storage, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage, 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 Pure Storage,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage, has no effect on the direction of Applied Materials, i.e., Applied Materials, and Pure Storage, go up and down completely randomly.

Pair Corralation between Applied Materials, and Pure Storage,

Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.75 times more return on investment than Pure Storage,. However, Applied Materials, is 1.75 times more volatile than Pure Storage,. It trades about 0.24 of its potential returns per unit of risk. Pure Storage, is currently generating about 0.2 per unit of risk. If you would invest  10,400  in Applied Materials, on October 24, 2024 and sell it today you would earn a total of  1,304  from holding Applied Materials, or generate 12.54% 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.  Pure Storage,

Applied Materials,

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Applied Materials, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pure Storage,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pure Storage, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials, and Pure Storage,

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

The idea behind Applied Materials, and Pure Storage, 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.