Correlation Between Hilton Food and Applied Materials

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

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

Diversification Opportunities for Hilton Food and Applied Materials

-0.34

Correlation Coefficient

Hilton Food  Applied Materials

Very good diversification

The 3 months correlation between Hilton and Applied is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Food Group and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Hilton Food 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 Hilton Food Group 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 Hilton Food i.e., Hilton Food and Applied Materials go up and down completely randomly.

Pair Corralation between Hilton Food and Applied Materials

Assuming the 90 days trading horizon Hilton Food Group is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Hilton Food Group is 1.94 times less risky than Applied Materials. The stock trades about -0.06 of its potential returns per unit of risk. The Applied Materials is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  18,403  in Applied Materials on September 3, 2024 and sell it today you would lose (753.00) from holding Applied Materials or give up 4.09% of portfolio value over 90 days.

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

Hilton Food Group  vs.  Applied Materials

Hilton Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hilton Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hilton Food is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Hilton Food and Applied Materials

The main advantage of trading using opposite Hilton Food and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Food 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 Hilton Food Group 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 Stocks Directory module to find actively traded stocks across global markets.