Correlation Between Applied Materials and Ichor Holdings

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

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

Diversification Opportunities for Applied Materials and Ichor Holdings

-0.26

Correlation Coefficient

Applied Materials  Ichor Holdings

Very good diversification

The 3 months correlation between Applied and Ichor is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Ichor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ichor Holdings 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 Ichor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ichor Holdings has no effect on the direction of Applied Materials i.e., Applied Materials and Ichor Holdings go up and down completely randomly.

Pair Corralation between Applied Materials and Ichor Holdings

Given the investment horizon of 90 days Applied Materials is expected to under-perform the Ichor Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 1.57 times less risky than Ichor Holdings. The stock trades about -0.2 of its potential returns per unit of risk. The Ichor Holdings is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  3,256  in Ichor Holdings on September 22, 2024 and sell it today you would lose (264.00) from holding Ichor Holdings or give up 8.11% 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.  Ichor Holdings

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ichor Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ichor Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, Ichor Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and Ichor Holdings

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

The idea behind Applied Materials and Ichor Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..