Correlation Between Applied Materials and LIVZON PHARMAC

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

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

Diversification Opportunities for Applied Materials and LIVZON PHARMAC

0.25

Correlation Coefficient

Applied Materials  LIVZON PHARMAC

Modest diversification

The 3 months correlation between Applied and LIVZON is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and LIVZON PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIVZON PHARMAC GRP 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 LIVZON PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIVZON PHARMAC GRP has no effect on the direction of Applied Materials i.e., Applied Materials and LIVZON PHARMAC go up and down completely randomly.

Pair Corralation between Applied Materials and LIVZON PHARMAC

Assuming the 90 days horizon Applied Materials is expected to generate 4.49 times less return on investment than LIVZON PHARMAC. But when comparing it to its historical volatility, Applied Materials is 2.22 times less risky than LIVZON PHARMAC. It trades about 0.04 of its potential returns per unit of risk. LIVZON PHARMAC GRP is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  138.00  in LIVZON PHARMAC GRP on October 9, 2024 and sell it today you would earn a total of  184.00  from holding LIVZON PHARMAC GRP or generate 133.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Applied Materials  vs.  LIVZON PHARMAC GRP

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LIVZON PHARMAC GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIVZON PHARMAC GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LIVZON PHARMAC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Applied Materials and LIVZON PHARMAC

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

The idea behind Applied Materials and LIVZON PHARMAC GRP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.