Correlation Between Applied Materials and ALIOR BANK

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

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

Diversification Opportunities for Applied Materials and ALIOR BANK

0.46

Correlation Coefficient

Applied Materials  ALIOR BANK

Very weak diversification

The 3 months correlation between Applied and ALIOR is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and ALIOR BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALIOR BANK 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 ALIOR BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALIOR BANK has no effect on the direction of Applied Materials i.e., Applied Materials and ALIOR BANK go up and down completely randomly.

Pair Corralation between Applied Materials and ALIOR BANK

Assuming the 90 days horizon Applied Materials is expected to under-perform the ALIOR BANK. In addition to that, Applied Materials is 1.15 times more volatile than ALIOR BANK. It trades about -0.06 of its total potential returns per unit of risk. ALIOR BANK is currently generating about -0.02 per unit of volatility. If you would invest  2,088  in ALIOR BANK on October 3, 2024 and sell it today you would lose (88.00) from holding ALIOR BANK or give up 4.21% of portfolio value over 90 days.

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

Applied Materials  vs.  ALIOR BANK

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ALIOR BANK

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Applied Materials and ALIOR BANK

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

The idea behind Applied Materials and ALIOR BANK 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.