Correlation Between APPLIED MATERIALS and CapitaLand Investment

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

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

Diversification Opportunities for APPLIED MATERIALS and CapitaLand Investment

0.61

Correlation Coefficient

APPLIED MATERIALS  CapitaLand Investment

Poor diversification

The 3 months correlation between APPLIED and CapitaLand is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and CapitaLand Investment go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and CapitaLand Investment

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.6 times more return on investment than CapitaLand Investment. However, APPLIED MATERIALS is 1.6 times more volatile than CapitaLand Investment Limited. It trades about 0.02 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about 0.02 per unit of risk. If you would invest  16,423  in APPLIED MATERIALS on September 4, 2024 and sell it today you would earn a total of  99.00  from holding APPLIED MATERIALS or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

APPLIED MATERIALS  vs.  CapitaLand Investment Limited

APPLIED MATERIALS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with APPLIED MATERIALS and CapitaLand Investment

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

The idea behind APPLIED MATERIALS and CapitaLand Investment Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.