Correlation Between Weiss Korea and Applied Materials

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

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

Diversification Opportunities for Weiss Korea and Applied Materials

0.76

Correlation Coefficient

Weiss Korea  Applied Materials

Poor diversification

The 3 months correlation between Weiss and Applied is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Weiss Korea Opportunity and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Weiss Korea 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 Weiss Korea Opportunity 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 Weiss Korea i.e., Weiss Korea and Applied Materials go up and down completely randomly.

Pair Corralation between Weiss Korea and Applied Materials

Assuming the 90 days trading horizon Weiss Korea is expected to generate 1.59 times less return on investment than Applied Materials. In addition to that, Weiss Korea is 1.1 times more volatile than Applied Materials. It trades about 0.02 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.04 per unit of volatility. If you would invest  18,326  in Applied Materials on October 22, 2024 and sell it today you would earn a total of  874.00  from holding Applied Materials or generate 4.77% return on investment over 90 days.

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

Weiss Korea Opportunity  vs.  Applied Materials

Weiss Korea Opportunity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weiss Korea Opportunity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Weiss Korea is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Applied Materials

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 3 (%) 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 Weiss Korea and Applied Materials

The main advantage of trading using opposite Weiss Korea and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weiss Korea 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 Weiss Korea Opportunity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..