Correlation Between APPLIED MATERIALS and Singapore Reinsurance

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

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

Diversification Opportunities for APPLIED MATERIALS and Singapore Reinsurance

-0.54

Correlation Coefficient

APPLIED MATERIALS  Singapore Reinsurance

Excellent diversification

The 3 months correlation between APPLIED and Singapore is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Singapore Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Reinsurance 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 Singapore Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Reinsurance has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Singapore Reinsurance go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Singapore Reinsurance

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 2.86 times less return on investment than Singapore Reinsurance. In addition to that, APPLIED MATERIALS is 1.68 times more volatile than Singapore Reinsurance. It trades about 0.02 of its total potential returns per unit of risk. Singapore Reinsurance is currently generating about 0.12 per unit of volatility. If you would invest  3,320  in Singapore Reinsurance on September 17, 2024 and sell it today you would earn a total of  100.00  from holding Singapore Reinsurance or generate 3.01% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Singapore Reinsurance

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 comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Singapore Reinsurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Reinsurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Singapore Reinsurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and Singapore Reinsurance

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

The idea behind APPLIED MATERIALS and Singapore Reinsurance 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.