Correlation Between Applied Materials and Weiss Korea

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

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

Diversification Opportunities for Applied Materials and Weiss Korea

0.66

Correlation Coefficient

Applied Materials  Weiss Korea

Poor diversification

The 3 months correlation between Applied and Weiss is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Weiss Korea Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weiss Korea Opportunity 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 Weiss Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weiss Korea Opportunity has no effect on the direction of Applied Materials i.e., Applied Materials and Weiss Korea go up and down completely randomly.

Pair Corralation between Applied Materials and Weiss Korea

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Weiss Korea. In addition to that, Applied Materials is 1.15 times more volatile than Weiss Korea Opportunity. It trades about -0.08 of its total potential returns per unit of risk. Weiss Korea Opportunity is currently generating about 0.01 per unit of volatility. If you would invest  15,700  in Weiss Korea Opportunity on September 19, 2024 and sell it today you would earn a total of  27.00  from holding Weiss Korea Opportunity or generate 0.17% return on investment over 90 days.

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

Applied Materials  vs.  Weiss Korea Opportunity

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 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.

Weiss Korea Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weiss Korea Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Weiss Korea is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Applied Materials and Weiss Korea

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

The idea behind Applied Materials and Weiss Korea Opportunity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.