Correlation Between Applied Materials and Sumco Corp
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Sumco Corp 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 Sumco Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Sumco Corp ADR, you can compare the effects of market volatilities on Applied Materials and Sumco Corp 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 Sumco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Sumco Corp.
Diversification Opportunities for Applied Materials and Sumco Corp
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Sumco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Sumco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumco Corp ADR 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 Sumco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumco Corp ADR has no effect on the direction of Applied Materials i.e., Applied Materials and Sumco Corp go up and down completely randomly.
Pair Corralation between Applied Materials and Sumco Corp
Given the investment horizon of 90 days Applied Materials is expected to under-perform the Sumco Corp. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 1.34 times less risky than Sumco Corp. The stock trades about -0.07 of its potential returns per unit of risk. The Sumco Corp ADR is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,602 in Sumco Corp ADR on December 5, 2024 and sell it today you would lose (113.00) from holding Sumco Corp ADR or give up 7.05% 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. Sumco Corp ADR
Performance |
Timeline |
Applied Materials |
Sumco Corp ADR |
Applied Materials and Sumco Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Applied Materials and Sumco Corp
The main advantage of trading using opposite Applied Materials and Sumco Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Sumco Corp 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 Sumco Corp will offset losses from the drop in Sumco Corp's long position.Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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