Correlation Between Vista Oil and Applied Materials

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

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

Diversification Opportunities for Vista Oil and Applied Materials

-0.69

Correlation Coefficient

Vista Oil  Applied Materials

Excellent diversification

The 3 months correlation between Vista and Applied is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vista Oil Gas and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Vista Oil 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 Vista Oil Gas 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 Vista Oil i.e., Vista Oil and Applied Materials go up and down completely randomly.

Pair Corralation between Vista Oil and Applied Materials

Assuming the 90 days trading horizon Vista Oil Gas is expected to generate 1.22 times more return on investment than Applied Materials. However, Vista Oil is 1.22 times more volatile than Applied Materials. It trades about 0.11 of its potential returns per unit of risk. Applied Materials is currently generating about -0.08 per unit of risk. If you would invest  95,400  in Vista Oil Gas on September 21, 2024 and sell it today you would earn a total of  13,841  from holding Vista Oil Gas or generate 14.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Vista Oil Gas  vs.  Applied Materials

Vista Oil Gas

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vista Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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 Vista Oil and Applied Materials

The main advantage of trading using opposite Vista Oil and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vista Oil 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 Vista Oil Gas 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..