Correlation Between Applied Materials and Penta Ocean

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

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

Diversification Opportunities for Applied Materials and Penta Ocean

0.29

Correlation Coefficient

Applied Materials  Penta Ocean

Modest diversification

The 3 months correlation between Applied and Penta is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Applied Materials i.e., Applied Materials and Penta Ocean go up and down completely randomly.

Pair Corralation between Applied Materials and Penta Ocean

Assuming the 90 days horizon Applied Materials is expected to under-perform the Penta Ocean. In addition to that, Applied Materials is 1.69 times more volatile than Penta Ocean Construction Co. It trades about -0.12 of its total potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.01 per unit of volatility. If you would invest  378.00  in Penta Ocean Construction Co on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Penta Ocean Construction Co or generate 0.0% return on investment over 90 days.

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

Applied Materials  vs.  Penta Ocean Construction Co

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Applied Materials and Penta Ocean

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

The idea behind Applied Materials and Penta Ocean Construction Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.