Correlation Between APPLIED MATERIALS and General Mills

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

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

Diversification Opportunities for APPLIED MATERIALS and General Mills

-0.61

Correlation Coefficient

APPLIED MATERIALS  General Mills

Excellent diversification

The 3 months correlation between APPLIED and General is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and General Mills go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and General Mills

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the General Mills. In addition to that, APPLIED MATERIALS is 1.48 times more volatile than General Mills. It trades about -0.06 of its total potential returns per unit of risk. General Mills is currently generating about 0.12 per unit of volatility. If you would invest  8,921  in General Mills on December 28, 2024 and sell it today you would earn a total of  1,201  from holding General Mills or generate 13.46% 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.  General Mills

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 fragile 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.

General Mills

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, General Mills reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and General Mills

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

The idea behind APPLIED MATERIALS and General Mills 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.