Correlation Between Applied Materials and Coloplast

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

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

Diversification Opportunities for Applied Materials and Coloplast

-0.38

Correlation Coefficient

Applied Materials  Coloplast

Very good diversification

The 3 months correlation between Applied and Coloplast is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast AS 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 Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast AS has no effect on the direction of Applied Materials i.e., Applied Materials and Coloplast go up and down completely randomly.

Pair Corralation between Applied Materials and Coloplast

Assuming the 90 days horizon Applied Materials is expected to under-perform the Coloplast. In addition to that, Applied Materials is 1.57 times more volatile than Coloplast AS. It trades about -0.07 of its total potential returns per unit of risk. Coloplast AS is currently generating about -0.02 per unit of volatility. If you would invest  12,135  in Coloplast AS on August 31, 2024 and sell it today you would lose (155.00) from holding Coloplast AS or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Applied Materials  vs.  Coloplast AS

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 nearly stable basic indicators, Applied Materials is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Coloplast AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Applied Materials and Coloplast

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

The idea behind Applied Materials and Coloplast AS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.