Correlation Between Applied Materials and Enviro Technologies
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Enviro Technologies 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 Enviro Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Enviro Technologies, you can compare the effects of market volatilities on Applied Materials and Enviro Technologies 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 Enviro Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Enviro Technologies.
Diversification Opportunities for Applied Materials and Enviro Technologies
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Applied and Enviro is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Enviro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enviro Technologies 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 Enviro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enviro Technologies has no effect on the direction of Applied Materials i.e., Applied Materials and Enviro Technologies go up and down completely randomly.
Pair Corralation between Applied Materials and Enviro Technologies
If you would invest 1.10 in Enviro Technologies on January 24, 2024 and sell it today you would earn a total of 0.00 from holding Enviro Technologies or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 5.0% |
| Values | Daily Returns |
Applied Materials vs. Enviro Technologies
Performance |
| Timeline |
| Applied Materials |
| Enviro Technologies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Applied Materials and Enviro Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Enviro Technologies
The main advantage of trading using opposite Applied Materials and Enviro Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Enviro Technologies 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 Enviro Technologies will offset losses from the drop in Enviro Technologies' long position.The idea behind Applied Materials and Enviro Technologies 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.| Enviro Technologies vs. GMS Inc | Enviro Technologies vs. Arrow Electronics | Enviro Technologies vs. MYT Netherlands Parent | Enviro Technologies vs. Western Union Co |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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