Correlation Between APPLIED MATERIALS and TOTAL GABON

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

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

Diversification Opportunities for APPLIED MATERIALS and TOTAL GABON

-0.25

Correlation Coefficient

APPLIED MATERIALS  TOTAL GABON

Very good diversification

The 3 months correlation between APPLIED and TOTAL is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and TOTAL GABON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL GABON 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 TOTAL GABON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL GABON has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and TOTAL GABON go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and TOTAL GABON

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the TOTAL GABON. But the stock apears to be less risky and, when comparing its historical volatility, APPLIED MATERIALS is 1.49 times less risky than TOTAL GABON. The stock trades about -0.11 of its potential returns per unit of risk. The TOTAL GABON is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  15,750  in TOTAL GABON on September 12, 2024 and sell it today you would earn a total of  2,950  from holding TOTAL GABON or generate 18.73% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  TOTAL GABON

APPLIED MATERIALS

Risk-Adjusted Performance

0 of 100

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.

TOTAL GABON

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL GABON are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TOTAL GABON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and TOTAL GABON

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

The idea behind APPLIED MATERIALS and TOTAL GABON 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.