Correlation Between Impax Asset and Applied Materials

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

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

Diversification Opportunities for Impax Asset and Applied Materials

0.76

Correlation Coefficient

Impax Asset  Applied Materials

Poor diversification

The 3 months correlation between Impax and Applied is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Impax Asset Management and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Impax Asset 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 Impax Asset Management 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 Impax Asset i.e., Impax Asset and Applied Materials go up and down completely randomly.

Pair Corralation between Impax Asset and Applied Materials

Assuming the 90 days trading horizon Impax Asset Management is expected to under-perform the Applied Materials. In addition to that, Impax Asset is 1.09 times more volatile than Applied Materials. It trades about -0.07 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.02 per unit of volatility. If you would invest  15,428  in Applied Materials on October 5, 2024 and sell it today you would earn a total of  1,087  from holding Applied Materials or generate 7.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.25%
Values	Daily Returns

Impax Asset Management  vs.  Applied Materials

Impax Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impax Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm 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 uncertain 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 Impax Asset and Applied Materials

The main advantage of trading using opposite Impax Asset and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impax Asset 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 Impax Asset Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.