Correlation Between APPLIED MATERIALS and FIREWEED METALS

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

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

Diversification Opportunities for APPLIED MATERIALS and FIREWEED METALS

-0.27

Correlation Coefficient

APPLIED MATERIALS  FIREWEED METALS

Very good diversification

The 3 months correlation between APPLIED and FIREWEED is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and FIREWEED METALS go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and FIREWEED METALS

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the FIREWEED METALS. But the stock apears to be less risky and, when comparing its historical volatility, APPLIED MATERIALS is 1.25 times less risky than FIREWEED METALS. The stock trades about -0.07 of its potential returns per unit of risk. The FIREWEED METALS P is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  93.00  in FIREWEED METALS P on December 24, 2024 and sell it today you would earn a total of  12.00  from holding FIREWEED METALS P or generate 12.9% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  FIREWEED METALS P

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.

FIREWEED METALS P

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FIREWEED METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and FIREWEED METALS

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

The idea behind APPLIED MATERIALS and FIREWEED METALS P 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.