Correlation Between Boyd Gaming and Applied Materials

Can any of the company-specific risk be diversified away by investing in both Boyd Gaming and Applied Materials 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 Boyd Gaming and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boyd Gaming and Applied Materials, you can compare the effects of market volatilities on Boyd Gaming and Applied Materials 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 Boyd Gaming with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Gaming and Applied Materials.

Diversification Opportunities for Boyd Gaming and Applied Materials

0.81

Correlation Coefficient

Boyd Gaming  Applied Materials

Very poor diversification

The 3 months correlation between Boyd and Applied is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Boyd Gaming 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 Boyd Gaming are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and Applied Materials go up and down completely randomly.

Pair Corralation between Boyd Gaming and Applied Materials

Assuming the 90 days trading horizon Boyd Gaming is expected to generate 0.63 times more return on investment than Applied Materials. However, Boyd Gaming is 1.58 times less risky than Applied Materials. It trades about -0.06 of its potential returns per unit of risk. Applied Materials is currently generating about -0.06 per unit of risk. If you would invest  6,832  in Boyd Gaming on December 29, 2024 and sell it today you would lose (482.00) from holding Boyd Gaming or give up 7.06% of portfolio value over 90 days.

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

Boyd Gaming  vs.  Applied Materials

Boyd Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Boyd Gaming and Applied Materials

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

The idea behind Boyd Gaming and Applied Materials 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.