Correlation Between Hologic and Applied Materials

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Can any of the company-specific risk be diversified away by investing in both Hologic 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 Hologic and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hologic and Applied Materials, you can compare the effects of market volatilities on Hologic 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 Hologic with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hologic and Applied Materials.

Diversification Opportunities for Hologic and Applied Materials

HologicAppliedDiversified AwayHologicAppliedDiversified Away100%
-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hologic and Applied is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hologic and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Hologic 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 Hologic 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 Hologic i.e., Hologic and Applied Materials go up and down completely randomly.

Pair Corralation between Hologic and Applied Materials

Assuming the 90 days horizon Hologic is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Hologic is 1.76 times less risky than Applied Materials. The stock trades about -0.22 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  15,828  in Applied Materials on November 19, 2024 and sell it today you would earn a total of  174.00  from holding Applied Materials or generate 1.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.36%
ValuesDaily Returns

Hologic  vs.  Applied Materials

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15HO1 AP2
       Timeline  
Hologic 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hologic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb60657075
Applied Materials 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Applied Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb155160165170175180185190

Hologic and Applied Materials Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.77-2.1-1.43-0.77-0.10.461.041.622.22.78 0.040.060.080.100.120.140.16
JavaScript chart by amCharts 3.21.15HO1 AP2
       Returns  

Pair Trading with Hologic and Applied Materials

The main advantage of trading using opposite Hologic and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hologic 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 Hologic 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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