Correlation Between APPLIED MATERIALS and HEALTHCARE REAL

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

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

Diversification Opportunities for APPLIED MATERIALS and HEALTHCARE REAL

-0.53

Correlation Coefficient

APPLIED MATERIALS  HEALTHCARE REAL

Excellent diversification

The 3 months correlation between APPLIED and HEALTHCARE is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and HEALTHCARE REAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHCARE REAL A 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 HEALTHCARE REAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHCARE REAL A has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and HEALTHCARE REAL go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and HEALTHCARE REAL

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the HEALTHCARE REAL. In addition to that, APPLIED MATERIALS is 1.35 times more volatile than HEALTHCARE REAL A. It trades about -0.32 of its total potential returns per unit of risk. HEALTHCARE REAL A is currently generating about -0.37 per unit of volatility. If you would invest  1,720  in HEALTHCARE REAL A on October 4, 2024 and sell it today you would lose (120.00) from holding HEALTHCARE REAL A or give up 6.98% 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.  HEALTHCARE REAL A

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. In spite of latest uncertain 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.

HEALTHCARE REAL A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HEALTHCARE REAL A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, HEALTHCARE REAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with APPLIED MATERIALS and HEALTHCARE REAL

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

The idea behind APPLIED MATERIALS and HEALTHCARE REAL A 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.