Correlation Between Charles Schwab and APPLIED MATERIALS

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

By analyzing existing cross correlation between The Charles Schwab and APPLIED MATERIALS, you can compare the effects of market volatilities on Charles Schwab 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 Charles Schwab with a short position of APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles Schwab and APPLIED MATERIALS.

Diversification Opportunities for Charles Schwab and APPLIED MATERIALS

0.55

Correlation Coefficient

Charles Schwab  APPLIED MATERIALS

Very weak diversification

The 3 months correlation between Charles and APPLIED is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Charles Schwab and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS and Charles Schwab 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 The Charles Schwab 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 Charles Schwab i.e., Charles Schwab and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between Charles Schwab and APPLIED MATERIALS

Assuming the 90 days horizon The Charles Schwab is expected to generate 0.63 times more return on investment than APPLIED MATERIALS. However, The Charles Schwab is 1.58 times less risky than APPLIED MATERIALS. It trades about 0.04 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about -0.08 per unit of risk. If you would invest  7,100  in The Charles Schwab on December 30, 2024 and sell it today you would earn a total of  256.00  from holding The Charles Schwab or generate 3.61% return on investment over 90 days.

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

The Charles Schwab  vs.  APPLIED MATERIALS

Charles Schwab

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Charles Schwab is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Charles Schwab and APPLIED MATERIALS

The main advantage of trading using opposite Charles Schwab and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Schwab 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's long position.

The idea behind The Charles Schwab 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.