Correlation Between Applied Materials and TTM TECHNOLOGIES

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

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

Diversification Opportunities for Applied Materials and TTM TECHNOLOGIES

0.64

Correlation Coefficient

Applied Materials  TTM TECHNOLOGIES

Poor diversification

The 3 months correlation between Applied and TTM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and TTM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTM TECHNOLOGIES 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 TTM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTM TECHNOLOGIES has no effect on the direction of Applied Materials i.e., Applied Materials and TTM TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Applied Materials and TTM TECHNOLOGIES

Assuming the 90 days horizon Applied Materials is expected to generate 1.36 times more return on investment than TTM TECHNOLOGIES. However, Applied Materials is 1.36 times more volatile than TTM TECHNOLOGIES. It trades about -0.07 of its potential returns per unit of risk. TTM TECHNOLOGIES is currently generating about -0.1 per unit of risk. If you would invest  16,093  in Applied Materials on December 21, 2024 and sell it today you would lose (2,129) from holding Applied Materials or give up 13.23% of portfolio value over 90 days.

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

Applied Materials  vs.  TTM TECHNOLOGIES

Applied Materials

Risk-Adjusted Performance

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.

TTM TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days TTM TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Applied Materials and TTM TECHNOLOGIES

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

The idea behind Applied Materials and TTM TECHNOLOGIES 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 Global Correlations module to find global opportunities by holding instruments from different markets.