Correlation Between Ecclesiastical Insurance and Applied Materials

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

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

Diversification Opportunities for Ecclesiastical Insurance and Applied Materials

-0.11

Correlation Coefficient

Ecclesiastical Insurance  Applied Materials

Good diversification

The 3 months correlation between Ecclesiastical and Applied is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ecclesiastical Insurance Offic and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Ecclesiastical Insurance 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 Ecclesiastical Insurance Office 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 Ecclesiastical Insurance i.e., Ecclesiastical Insurance and Applied Materials go up and down completely randomly.

Pair Corralation between Ecclesiastical Insurance and Applied Materials

Assuming the 90 days trading horizon Ecclesiastical Insurance is expected to generate 4.34 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Ecclesiastical Insurance Office is 2.97 times less risky than Applied Materials. It trades about 0.03 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,979  in Applied Materials on October 6, 2024 and sell it today you would earn a total of  5,810  from holding Applied Materials or generate 52.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Ecclesiastical Insurance Offic  vs.  Applied Materials

Ecclesiastical Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecclesiastical Insurance Office are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ecclesiastical Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ecclesiastical Insurance and Applied Materials

The main advantage of trading using opposite Ecclesiastical Insurance and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecclesiastical Insurance 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 Ecclesiastical Insurance Office 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.