Correlation Between Applied Materials and Gateway Real
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Gateway Real 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 Gateway Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Gateway Real Estate, you can compare the effects of market volatilities on Applied Materials and Gateway Real 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 Gateway Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Gateway Real.
Diversification Opportunities for Applied Materials and Gateway Real
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Gateway is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Gateway Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Real Estate 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 Gateway Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Real Estate has no effect on the direction of Applied Materials i.e., Applied Materials and Gateway Real go up and down completely randomly.
Pair Corralation between Applied Materials and Gateway Real
Assuming the 90 days horizon Applied Materials is expected to generate 0.34 times more return on investment than Gateway Real. However, Applied Materials is 2.94 times less risky than Gateway Real. It trades about -0.12 of its potential returns per unit of risk. Gateway Real Estate is currently generating about -0.23 per unit of risk. If you would invest 16,878 in Applied Materials on September 25, 2024 and sell it today you would lose (1,072) from holding Applied Materials or give up 6.35% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 90.48% |
Values | Daily Returns |
Applied Materials vs. Gateway Real Estate
Performance |
Timeline |
Applied Materials |
Gateway Real Estate |
Applied Materials and Gateway Real Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Applied Materials and Gateway Real
The main advantage of trading using opposite Applied Materials and Gateway Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Gateway Real 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 Gateway Real will offset losses from the drop in Gateway Real's long position.Applied Materials vs. ASML HOLDING NY | Applied Materials vs. ASML Holding NV | Applied Materials vs. ASML Holding NV | Applied Materials vs. Tokyo Electron Limited |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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