Correlation Between Applied Materials and XTANT MEDICAL

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

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

Diversification Opportunities for Applied Materials and XTANT MEDICAL

0.7

Correlation Coefficient

Applied Materials  XTANT MEDICAL

Poor diversification

The 3 months correlation between Applied and XTANT is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and XTANT MEDICAL HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTANT MEDICAL HLDGS 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 XTANT MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTANT MEDICAL HLDGS has no effect on the direction of Applied Materials i.e., Applied Materials and XTANT MEDICAL go up and down completely randomly.

Pair Corralation between Applied Materials and XTANT MEDICAL

Assuming the 90 days horizon Applied Materials is expected to generate 0.49 times more return on investment than XTANT MEDICAL. However, Applied Materials is 2.05 times less risky than XTANT MEDICAL. It trades about 0.06 of its potential returns per unit of risk. XTANT MEDICAL HLDGS is currently generating about 0.0 per unit of risk. If you would invest  9,016  in Applied Materials on September 22, 2024 and sell it today you would earn a total of  6,790  from holding Applied Materials or generate 75.31% return on investment over 90 days.

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

Applied Materials  vs.  XTANT MEDICAL HLDGS

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

XTANT MEDICAL HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XTANT MEDICAL HLDGS 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Applied Materials and XTANT MEDICAL

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

The idea behind Applied Materials and XTANT MEDICAL HLDGS 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.