Correlation Between Nano Labs and Applied Materials

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

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

Diversification Opportunities for Nano Labs and Applied Materials

-0.05

Correlation Coefficient

Nano Labs  Applied Materials

Good diversification

The 3 months correlation between Nano and Applied is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nano Labs and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Nano Labs 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 Nano Labs are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Nano Labs i.e., Nano Labs and Applied Materials go up and down completely randomly.

Pair Corralation between Nano Labs and Applied Materials

Allowing for the 90-day total investment horizon Nano Labs is expected to generate 11.01 times more return on investment than Applied Materials. However, Nano Labs is 11.01 times more volatile than Applied Materials. It trades about 0.23 of its potential returns per unit of risk. Applied Materials is currently generating about 0.02 per unit of risk. If you would invest  442.00  in Nano Labs on September 16, 2024 and sell it today you would earn a total of  445.00  from holding Nano Labs or generate 100.68% return on investment over 90 days.

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

Nano Labs  vs.  Applied Materials

Nano Labs

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nano Labs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nano Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Nano Labs and Applied Materials

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

The idea behind Nano Labs and Applied Materials 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.