Correlation Between Applied Materials and Ashtead Technology

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

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

Diversification Opportunities for Applied Materials and Ashtead Technology

0.62

Correlation Coefficient

Applied Materials  Ashtead Technology

Poor diversification

The 3 months correlation between Applied and Ashtead is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and Applied Materials 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 Applied Materials are associated (or correlated) with Ashtead Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Technology has no effect on the direction of Applied Materials i.e., Applied Materials and Ashtead Technology go up and down completely randomly.

Pair Corralation between Applied Materials and Ashtead Technology

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Ashtead Technology. In addition to that, Applied Materials is 1.0 times more volatile than Ashtead Technology Holdings. It trades about -0.09 of its total potential returns per unit of risk. Ashtead Technology Holdings is currently generating about -0.08 per unit of volatility. If you would invest  60,500  in Ashtead Technology Holdings on September 22, 2024 and sell it today you would lose (8,800) from holding Ashtead Technology Holdings or give up 14.55% of portfolio value over 90 days.

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

Applied Materials  vs.  Ashtead Technology Holdings

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

Ashtead Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashtead Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Applied Materials and Ashtead Technology

The main advantage of trading using opposite Applied Materials and Ashtead Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Ashtead Technology 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 Ashtead Technology will offset losses from the drop in Ashtead Technology's long position.

The idea behind Applied Materials and Ashtead Technology Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.