Correlation Between Ichor Holdings and Applied Opt

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

By analyzing existing cross correlation between Ichor Holdings and Applied Opt, you can compare the effects of market volatilities on Ichor Holdings and Applied Opt 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 Ichor Holdings with a short position of Applied Opt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ichor Holdings and Applied Opt.

Diversification Opportunities for Ichor Holdings and Applied Opt

0.66

Correlation Coefficient

Ichor Holdings  Applied Opt

Poor diversification

The 3 months correlation between Ichor and Applied is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ichor Holdings and Applied Opt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Opt and Ichor Holdings 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 Ichor Holdings are associated (or correlated) with Applied Opt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Opt has no effect on the direction of Ichor Holdings i.e., Ichor Holdings and Applied Opt go up and down completely randomly.

Pair Corralation between Ichor Holdings and Applied Opt

Given the investment horizon of 90 days Ichor Holdings is expected to generate 5.3 times less return on investment than Applied Opt. But when comparing it to its historical volatility, Ichor Holdings is 2.27 times less risky than Applied Opt. It trades about 0.1 of its potential returns per unit of risk. Applied Opt is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Applied Opt on September 4, 2024 and sell it today you would earn a total of  2,774  from holding Applied Opt or generate 213.38% return on investment over 90 days.

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

Ichor Holdings  vs.  Applied Opt

Ichor Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ichor Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, Ichor Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Opt

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Opt are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Applied Opt demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ichor Holdings and Applied Opt

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

The idea behind Ichor Holdings and Applied Opt 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 Commodity Directory module to find actively traded commodities issued by global exchanges.