Correlation Between Applied Materials and Grupo Financiero

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

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

Diversification Opportunities for Applied Materials and Grupo Financiero

0.56

Correlation Coefficient

Applied Materials  Grupo Financiero

Very weak diversification

The 3 months correlation between Applied and Grupo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Grupo Financiero Banorte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Banorte 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Banorte has no effect on the direction of Applied Materials i.e., Applied Materials and Grupo Financiero go up and down completely randomly.

Pair Corralation between Applied Materials and Grupo Financiero

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Grupo Financiero. In addition to that, Applied Materials is 1.15 times more volatile than Grupo Financiero Banorte. It trades about -0.15 of its total potential returns per unit of risk. Grupo Financiero Banorte is currently generating about 0.05 per unit of volatility. If you would invest  13,514  in Grupo Financiero Banorte on September 24, 2024 and sell it today you would earn a total of  215.00  from holding Grupo Financiero Banorte or generate 1.59% return on investment over 90 days.

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

Applied Materials  vs.  Grupo Financiero Banorte

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 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.

Grupo Financiero Banorte

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Grupo Financiero Banorte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Applied Materials and Grupo Financiero

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

The idea behind Applied Materials and Grupo Financiero Banorte 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.