Correlation Between APPLIED MATERIALS and INTER CARS

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

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

Diversification Opportunities for APPLIED MATERIALS and INTER CARS

0.28

Correlation Coefficient

APPLIED MATERIALS  INTER CARS

Modest diversification

The 3 months correlation between APPLIED and INTER is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and INTER CARS go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and INTER CARS

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.32 times more return on investment than INTER CARS. However, APPLIED MATERIALS is 1.32 times more volatile than INTER CARS SA. It trades about 0.03 of its potential returns per unit of risk. INTER CARS SA is currently generating about -0.02 per unit of risk. If you would invest  14,531  in APPLIED MATERIALS on September 12, 2024 and sell it today you would earn a total of  1,851  from holding APPLIED MATERIALS or generate 12.74% 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.  INTER CARS SA

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 comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

INTER CARS SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS 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 INTER CARS

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

The idea behind APPLIED MATERIALS and INTER CARS SA 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.