Correlation Between APPLIED MATERIALS and Sinopec Shanghai

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

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

Diversification Opportunities for APPLIED MATERIALS and Sinopec Shanghai

-0.23

Correlation Coefficient

APPLIED MATERIALS  Sinopec Shanghai

Very good diversification

The 3 months correlation between APPLIED and Sinopec is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Sinopec Shanghai Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Shanghai Pet 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 Sinopec Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Shanghai Pet has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Sinopec Shanghai go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Sinopec Shanghai

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Sinopec Shanghai. But the stock apears to be less risky and, when comparing its historical volatility, APPLIED MATERIALS is 1.57 times less risky than Sinopec Shanghai. The stock trades about -0.07 of its potential returns per unit of risk. The Sinopec Shanghai Petrochemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Sinopec Shanghai Petrochemical on December 10, 2024 and sell it today you would earn a total of  0.00  from holding Sinopec Shanghai Petrochemical or generate 0.0% 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.  Sinopec Shanghai Petrochemical

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 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.

Sinopec Shanghai Pet

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Shanghai Petrochemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Sinopec Shanghai is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with APPLIED MATERIALS and Sinopec Shanghai

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

The idea behind APPLIED MATERIALS and Sinopec Shanghai Petrochemical 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.