Correlation Between APPLIED MATERIALS and DALATA HOTEL

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

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

Diversification Opportunities for APPLIED MATERIALS and DALATA HOTEL

-0.63

Correlation Coefficient

APPLIED MATERIALS  DALATA HOTEL

Excellent diversification

The 3 months correlation between APPLIED and DALATA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL 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 DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and DALATA HOTEL go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and DALATA HOTEL

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.05 times less return on investment than DALATA HOTEL. But when comparing it to its historical volatility, APPLIED MATERIALS is 1.69 times less risky than DALATA HOTEL. It trades about 0.06 of its potential returns per unit of risk. DALATA HOTEL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  320.00  in DALATA HOTEL on September 24, 2024 and sell it today you would earn a total of  122.00  from holding DALATA HOTEL or generate 38.13% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  DALATA HOTEL

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

DALATA HOTEL

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DALATA HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and DALATA HOTEL

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

The idea behind APPLIED MATERIALS and DALATA HOTEL 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.