Correlation Between Applied Materials and Nano Labs

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

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

Diversification Opportunities for Applied Materials and Nano Labs

-0.09

Correlation Coefficient

Applied Materials  Nano Labs

Good diversification

The 3 months correlation between Applied and Nano is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Nano Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nano Labs 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 Nano Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nano Labs has no effect on the direction of Applied Materials i.e., Applied Materials and Nano Labs go up and down completely randomly.

Pair Corralation between Applied Materials and Nano Labs

Given the investment horizon of 90 days Applied Materials is expected to generate 6.39 times less return on investment than Nano Labs. But when comparing it to its historical volatility, Applied Materials is 5.42 times less risky than Nano Labs. It trades about 0.04 of its potential returns per unit of risk. Nano Labs is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,420  in Nano Labs on September 26, 2024 and sell it today you would lose (521.00) from holding Nano Labs or give up 36.69% 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.  Nano Labs

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 weak 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.

Nano Labs

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nano Labs are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nano Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and Nano Labs

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

The idea behind Applied Materials and Nano Labs 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.