Correlation Between Promotora and Applied Materials

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

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

Diversification Opportunities for Promotora and Applied Materials

-0.32

Correlation Coefficient

Promotora  Applied Materials

Very good diversification

The 3 months correlation between Promotora and Applied is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Promotora 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 Promotora y Operadora 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 Promotora i.e., Promotora and Applied Materials go up and down completely randomly.

Pair Corralation between Promotora and Applied Materials

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 0.64 times more return on investment than Applied Materials. However, Promotora y Operadora is 1.55 times less risky than Applied Materials. It trades about 0.19 of its potential returns per unit of risk. Applied Materials is currently generating about -0.07 per unit of risk. If you would invest  17,337  in Promotora y Operadora on December 30, 2024 and sell it today you would earn a total of  3,199  from holding Promotora y Operadora or generate 18.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Promotora y Operadora  vs.  Applied Materials

Promotora y Operadora

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Promotora sustained solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Promotora and Applied Materials

The main advantage of trading using opposite Promotora and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promotora 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 Promotora y Operadora 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.