Correlation Between Uber Technologies and Applied Materials

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

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

Diversification Opportunities for Uber Technologies and Applied Materials

0.61

Correlation Coefficient

Uber Technologies  Applied Materials

Poor diversification

The 3 months correlation between Uber and Applied is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Uber Technologies and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Uber Technologies 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 Uber Technologies 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 Uber Technologies i.e., Uber Technologies and Applied Materials go up and down completely randomly.

Pair Corralation between Uber Technologies and Applied Materials

Assuming the 90 days trading horizon Uber Technologies is expected to under-perform the Applied Materials. In addition to that, Uber Technologies is 1.04 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 -0.07 per unit of volatility. If you would invest  18,094  in Applied Materials on September 29, 2024 and sell it today you would lose (2,250) from holding Applied Materials or give up 12.44% of portfolio value over 90 days.

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

Uber Technologies  vs.  Applied Materials

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Uber Technologies and Applied Materials

The main advantage of trading using opposite Uber Technologies and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber Technologies 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 Uber Technologies 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.