Correlation Between APPLIED MATERIALS and EHEALTH

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

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

Diversification Opportunities for APPLIED MATERIALS and EHEALTH

0.85

Correlation Coefficient

APPLIED MATERIALS  EHEALTH

Very poor diversification

The 3 months correlation between APPLIED and EHEALTH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and EHEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHEALTH 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 EHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EHEALTH has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and EHEALTH go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and EHEALTH

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 0.69 times more return on investment than EHEALTH. However, APPLIED MATERIALS is 1.45 times less risky than EHEALTH. It trades about -0.08 of its potential returns per unit of risk. EHEALTH is currently generating about -0.08 per unit of risk. If you would invest  15,870  in APPLIED MATERIALS on December 30, 2024 and sell it today you would lose (2,388) from holding APPLIED MATERIALS or give up 15.05% of portfolio value over 90 days.

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

APPLIED MATERIALS  vs.  EHEALTH

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

EHEALTH

Risk-Adjusted Performance

Very Weak

Over the last 90 days EHEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with APPLIED MATERIALS and EHEALTH

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

The idea behind APPLIED MATERIALS and EHEALTH 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.