Correlation Between APPLIED MATERIALS and Yokohama Rubber

Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Yokohama Rubber 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 Yokohama Rubber 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 Yokohama Rubber, you can compare the effects of market volatilities on APPLIED MATERIALS and Yokohama Rubber 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 Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Yokohama Rubber.

Diversification Opportunities for APPLIED MATERIALS and Yokohama Rubber

0.45

Correlation Coefficient

APPLIED MATERIALS  Yokohama Rubber

Very weak diversification

The 3 months correlation between APPLIED and Yokohama is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Yokohama Rubber go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Yokohama Rubber

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Yokohama Rubber. In addition to that, APPLIED MATERIALS is 1.74 times more volatile than The Yokohama Rubber. It trades about -0.01 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.03 per unit of volatility. If you would invest  1,930  in The Yokohama Rubber on September 13, 2024 and sell it today you would earn a total of  50.00  from holding The Yokohama Rubber or generate 2.59% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  The Yokohama Rubber

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.

Yokohama Rubber

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with APPLIED MATERIALS and Yokohama Rubber

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

The idea behind APPLIED MATERIALS and The Yokohama Rubber 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.