Correlation Between Applied Materials and SCOTT TECHNOLOGY

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

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

Diversification Opportunities for Applied Materials and SCOTT TECHNOLOGY

-0.37

Correlation Coefficient

Applied Materials  SCOTT TECHNOLOGY

Very good diversification

The 3 months correlation between Applied and SCOTT is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of Applied Materials i.e., Applied Materials and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between Applied Materials and SCOTT TECHNOLOGY

Assuming the 90 days horizon Applied Materials is expected to generate 0.79 times more return on investment than SCOTT TECHNOLOGY. However, Applied Materials is 1.26 times less risky than SCOTT TECHNOLOGY. It trades about 0.05 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.01 per unit of risk. If you would invest  9,740  in Applied Materials on September 28, 2024 and sell it today you would earn a total of  6,390  from holding Applied Materials or generate 65.61% return on investment over 90 days.

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

Applied Materials  vs.  SCOTT TECHNOLOGY

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.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and SCOTT TECHNOLOGY

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

The idea behind Applied Materials and SCOTT TECHNOLOGY 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.