Correlation Between NORDIC HALIBUT and Applied Materials

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

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

Diversification Opportunities for NORDIC HALIBUT and Applied Materials

0.66

Correlation Coefficient

NORDIC HALIBUT  Applied Materials

Poor diversification

The 3 months correlation between NORDIC and Applied is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NORDIC HALIBUT AS and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and NORDIC HALIBUT 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 NORDIC HALIBUT AS 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 NORDIC HALIBUT i.e., NORDIC HALIBUT and Applied Materials go up and down completely randomly.

Pair Corralation between NORDIC HALIBUT and Applied Materials

Assuming the 90 days horizon NORDIC HALIBUT AS is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, NORDIC HALIBUT AS is 1.08 times less risky than Applied Materials. The stock trades about -0.18 of its potential returns per unit of risk. The Applied Materials is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  16,867  in Applied Materials on September 16, 2024 and sell it today you would lose (777.00) from holding Applied Materials or give up 4.61% of portfolio value over 90 days.

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

NORDIC HALIBUT AS  vs.  Applied Materials

NORDIC HALIBUT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORDIC HALIBUT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company 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. Despite nearly stable basic indicators, Applied Materials is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NORDIC HALIBUT and Applied Materials

The main advantage of trading using opposite NORDIC HALIBUT and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORDIC HALIBUT 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 NORDIC HALIBUT AS 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.