Correlation Between Applied Materials and FibraHotel

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

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

Diversification Opportunities for Applied Materials and FibraHotel

-0.03

Correlation Coefficient

Applied Materials  FibraHotel

Good diversification

The 3 months correlation between Applied and FibraHotel is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel 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 FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Applied Materials i.e., Applied Materials and FibraHotel go up and down completely randomly.

Pair Corralation between Applied Materials and FibraHotel

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the FibraHotel. In addition to that, Applied Materials is 1.27 times more volatile than FibraHotel. It trades about -0.11 of its total potential returns per unit of risk. FibraHotel is currently generating about 0.01 per unit of volatility. If you would invest  999.00  in FibraHotel on December 5, 2024 and sell it today you would lose (2.00) from holding FibraHotel or give up 0.2% of portfolio value over 90 days.

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

Applied Materials  vs.  FibraHotel

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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

FibraHotel

Risk-Adjusted Performance

Modest

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

Pair Trading with Applied Materials and FibraHotel

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

The idea behind Applied Materials and FibraHotel 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.