Correlation Between Applied Materials and Primary Health

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

By analyzing existing cross correlation between Applied Materials and Primary Health Properties, you can compare the effects of market volatilities on Applied Materials and Primary Health 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 Primary Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Primary Health.

Diversification Opportunities for Applied Materials and Primary Health

0.81

Correlation Coefficient

Applied Materials  Primary Health

Very poor diversification

The 3 months correlation between Applied and Primary is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Primary Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primary Health Properties 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 Primary Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primary Health Properties has no effect on the direction of Applied Materials i.e., Applied Materials and Primary Health go up and down completely randomly.

Pair Corralation between Applied Materials and Primary Health

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Primary Health. In addition to that, Applied Materials is 2.51 times more volatile than Primary Health Properties. It trades about -0.22 of its total potential returns per unit of risk. Primary Health Properties is currently generating about -0.11 per unit of volatility. If you would invest  9,405  in Primary Health Properties on October 1, 2024 and sell it today you would lose (185.00) from holding Primary Health Properties or give up 1.97% of portfolio value over 90 days.

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

Applied Materials  vs.  Primary Health Properties

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 conflicting 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.

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Applied Materials and Primary Health

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

The idea behind Applied Materials and Primary Health Properties 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.