Correlation Between APPLIED MATERIALS and Selective Insurance

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

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

Diversification Opportunities for APPLIED MATERIALS and Selective Insurance

-0.56

Correlation Coefficient

APPLIED MATERIALS  Selective Insurance

Excellent diversification

The 3 months correlation between APPLIED and Selective is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Selective Insurance go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Selective Insurance

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.44 times more return on investment than Selective Insurance. However, APPLIED MATERIALS is 1.44 times more volatile than Selective Insurance Group. It trades about 0.05 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.01 per unit of risk. If you would invest  9,645  in APPLIED MATERIALS on September 29, 2024 and sell it today you would earn a total of  6,331  from holding APPLIED MATERIALS or generate 65.64% 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.  Selective Insurance Group

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.

Selective Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Selective Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with APPLIED MATERIALS and Selective Insurance

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

The idea behind APPLIED MATERIALS and Selective Insurance Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.