Correlation Between Applied Materials and El Puerto

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

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

Diversification Opportunities for Applied Materials and El Puerto

0.59

Correlation Coefficient

Applied Materials  El Puerto

Very weak diversification

The 3 months correlation between Applied and LIVEPOLC-1 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and El Puerto de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Puerto de 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 El Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Puerto de has no effect on the direction of Applied Materials i.e., Applied Materials and El Puerto go up and down completely randomly.

Pair Corralation between Applied Materials and El Puerto

Assuming the 90 days trading horizon Applied Materials is expected to generate 1.9 times more return on investment than El Puerto. However, Applied Materials is 1.9 times more volatile than El Puerto de. It trades about 0.03 of its potential returns per unit of risk. El Puerto de is currently generating about -0.08 per unit of risk. If you would invest  359,138  in Applied Materials on September 5, 2024 and sell it today you would earn a total of  12,862  from holding Applied Materials or generate 3.58% 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.  El Puerto de

Applied Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Applied Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Applied Materials and El Puerto

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

The idea behind Applied Materials and El Puerto de 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 Stocks Directory module to find actively traded stocks across global markets.