Correlation Between APPLIED MATERIALS and Aegean Airlines

Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Aegean Airlines 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 Aegean Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APPLIED MATERIALS and Aegean Airlines SA, you can compare the effects of market volatilities on APPLIED MATERIALS and Aegean Airlines 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 Aegean Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Aegean Airlines.

Diversification Opportunities for APPLIED MATERIALS and Aegean Airlines

-0.6

Correlation Coefficient

APPLIED MATERIALS  Aegean Airlines

Excellent diversification

The 3 months correlation between APPLIED and Aegean is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA 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 Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Aegean Airlines go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Aegean Airlines

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Aegean Airlines. In addition to that, APPLIED MATERIALS is 1.27 times more volatile than Aegean Airlines SA. It trades about -0.05 of its total potential returns per unit of risk. Aegean Airlines SA is currently generating about 0.14 per unit of volatility. If you would invest  1,002  in Aegean Airlines SA on December 21, 2024 and sell it today you would earn a total of  178.00  from holding Aegean Airlines SA or generate 17.76% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Aegean Airlines SA

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. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Aegean Airlines SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aegean Airlines SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aegean Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and Aegean Airlines

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

The idea behind APPLIED MATERIALS and Aegean Airlines SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.