Correlation Between APPLIED MATERIALS and T Rowe

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

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

Diversification Opportunities for APPLIED MATERIALS and T Rowe

-0.67

Correlation Coefficient

APPLIED MATERIALS  T Rowe

Excellent diversification

The 3 months correlation between APPLIED and TR1 is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and T Rowe go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and T Rowe

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the T Rowe. In addition to that, APPLIED MATERIALS is 1.3 times more volatile than T Rowe Price. It trades about -0.03 of its total potential returns per unit of risk. T Rowe Price is currently generating about 0.12 per unit of volatility. If you would invest  9,657  in T Rowe Price on October 10, 2024 and sell it today you would earn a total of  1,307  from holding T Rowe Price or generate 13.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

APPLIED MATERIALS  vs.  T Rowe Price

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

T Rowe Price

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, T Rowe reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and T Rowe

The main advantage of trading using opposite APPLIED MATERIALS and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind APPLIED MATERIALS and T Rowe Price 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.