Correlation Between Porvair Plc and Applied Materials

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

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

Diversification Opportunities for Porvair Plc and Applied Materials

-0.28

Correlation Coefficient

Porvair Plc  Applied Materials

Very good diversification

The 3 months correlation between Porvair and Applied is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Porvair plc and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Porvair Plc 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 Porvair plc 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 Porvair Plc i.e., Porvair Plc and Applied Materials go up and down completely randomly.

Pair Corralation between Porvair Plc and Applied Materials

Assuming the 90 days trading horizon Porvair Plc is expected to generate 1.66 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Porvair plc is 1.53 times less risky than Applied Materials. It trades about 0.05 of its potential returns per unit of risk. Applied Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  17,946  in Applied Materials on October 23, 2024 and sell it today you would earn a total of  1,322  from holding Applied Materials or generate 7.37% return on investment over 90 days.

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

Porvair plc  vs.  Applied Materials

Porvair plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Porvair Plc 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

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Applied Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Porvair Plc and Applied Materials

The main advantage of trading using opposite Porvair Plc and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porvair Plc 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 Porvair plc 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.