Correlation Between Applied Materials and UTStarcom Holdings

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

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

Diversification Opportunities for Applied Materials and UTStarcom Holdings

-0.21

Correlation Coefficient

Applied Materials  UTStarcom Holdings

Very good diversification

The 3 months correlation between Applied and UTStarcom is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and UTStarcom Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTStarcom Holdings Corp 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 UTStarcom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTStarcom Holdings Corp has no effect on the direction of Applied Materials i.e., Applied Materials and UTStarcom Holdings go up and down completely randomly.

Pair Corralation between Applied Materials and UTStarcom Holdings

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the UTStarcom Holdings. In addition to that, Applied Materials is 1.77 times more volatile than UTStarcom Holdings Corp. It trades about -0.1 of its total potential returns per unit of risk. UTStarcom Holdings Corp is currently generating about 0.09 per unit of volatility. If you would invest  5,274  in UTStarcom Holdings Corp on September 26, 2024 and sell it today you would earn a total of  426.00  from holding UTStarcom Holdings Corp or generate 8.08% return on investment over 90 days.

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

Applied Materials  vs.  UTStarcom Holdings Corp

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

UTStarcom Holdings Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UTStarcom Holdings Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, UTStarcom Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Applied Materials and UTStarcom Holdings

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

The idea behind Applied Materials and UTStarcom Holdings Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.