Correlation Between Applied Materials and SEALED AIR

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

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

Diversification Opportunities for Applied Materials and SEALED AIR

-0.58

Correlation Coefficient

Applied Materials  SEALED AIR

Excellent diversification

The 3 months correlation between Applied and SEALED is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and SEALED AIR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEALED AIR 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 SEALED AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEALED AIR has no effect on the direction of Applied Materials i.e., Applied Materials and SEALED AIR go up and down completely randomly.

Pair Corralation between Applied Materials and SEALED AIR

Assuming the 90 days horizon Applied Materials is expected to under-perform the SEALED AIR. In addition to that, Applied Materials is 1.62 times more volatile than SEALED AIR . It trades about -0.08 of its total potential returns per unit of risk. SEALED AIR is currently generating about -0.12 per unit of volatility. If you would invest  3,381  in SEALED AIR on September 29, 2024 and sell it today you would lose (121.00) from holding SEALED AIR or give up 3.58% of portfolio value over 90 days.

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

Applied Materials  vs.  SEALED AIR

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.

SEALED AIR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SEALED AIR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SEALED AIR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Applied Materials and SEALED AIR

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

The idea behind Applied Materials and SEALED AIR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..