Correlation Between CapitaLand Investment and APPLIED MATERIALS

Can any of the company-specific risk be diversified away by investing in both CapitaLand Investment 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 CapitaLand Investment and APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CapitaLand Investment Limited and APPLIED MATERIALS, you can compare the effects of market volatilities on CapitaLand Investment 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 CapitaLand Investment with a short position of APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CapitaLand Investment and APPLIED MATERIALS.

Diversification Opportunities for CapitaLand Investment and APPLIED MATERIALS

0.6

Correlation Coefficient

CapitaLand Investment  APPLIED MATERIALS

Poor diversification

The 3 months correlation between CapitaLand and APPLIED is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS and CapitaLand Investment 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 CapitaLand Investment Limited 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 CapitaLand Investment i.e., CapitaLand Investment and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between CapitaLand Investment and APPLIED MATERIALS

Assuming the 90 days horizon CapitaLand Investment Limited is expected to generate 0.58 times more return on investment than APPLIED MATERIALS. However, CapitaLand Investment Limited is 1.71 times less risky than APPLIED MATERIALS. It trades about 0.01 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about -0.03 per unit of risk. If you would invest  189.00  in CapitaLand Investment Limited on September 3, 2024 and sell it today you would earn a total of  1.00  from holding CapitaLand Investment Limited or generate 0.53% return on investment over 90 days.

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

CapitaLand Investment Limited  vs.  APPLIED MATERIALS

CapitaLand Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CapitaLand Investment Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CapitaLand Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CapitaLand Investment and APPLIED MATERIALS

The main advantage of trading using opposite CapitaLand Investment and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CapitaLand Investment 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's long position.

The idea behind CapitaLand Investment Limited 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.