Correlation Between APPLIED MATERIALS and Walt Disney

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

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

Diversification Opportunities for APPLIED MATERIALS and Walt Disney

0.74

Correlation Coefficient

APPLIED MATERIALS  Walt Disney

Poor diversification

The 3 months correlation between APPLIED and Walt is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Walt Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Walt Disney go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Walt Disney

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.7 times more return on investment than Walt Disney. However, APPLIED MATERIALS is 1.7 times more volatile than The Walt Disney. It trades about -0.08 of its potential returns per unit of risk. The Walt Disney is currently generating about -0.15 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	Significant
Accuracy	100.0%
Values	Daily Returns

APPLIED MATERIALS  vs.  The Walt Disney

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 fragile 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.

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.

Pair Trading with APPLIED MATERIALS and Walt Disney

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

The idea behind APPLIED MATERIALS and The Walt Disney 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.