Correlation Between Applied Materials and Ichor Holdings

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Can any of the company-specific risk be diversified away by investing in both Applied Materials and Ichor Holdings 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 Ichor Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Ichor Holdings, you can compare the effects of market volatilities on Applied Materials and Ichor Holdings 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 Ichor Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Ichor Holdings.

Diversification Opportunities for Applied Materials and Ichor Holdings

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Applied and Ichor is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Ichor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ichor Holdings 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 Ichor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ichor Holdings has no effect on the direction of Applied Materials i.e., Applied Materials and Ichor Holdings go up and down completely randomly.

Pair Corralation between Applied Materials and Ichor Holdings

Given the investment horizon of 90 days Applied Materials is expected to generate 0.65 times more return on investment than Ichor Holdings. However, Applied Materials is 1.55 times less risky than Ichor Holdings. It trades about 0.07 of its potential returns per unit of risk. Ichor Holdings is currently generating about -0.16 per unit of risk. If you would invest  20,286  in Applied Materials on December 29, 2023 and sell it today you would earn a total of  514.00  from holding Applied Materials or generate 2.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Applied Materials  vs.  Ichor Holdings

 Performance 
       Timeline  
Applied Materials 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.
Ichor Holdings 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ichor Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, Ichor Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials and Ichor Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Applied Materials and Ichor Holdings

The main advantage of trading using opposite Applied Materials and Ichor Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Ichor Holdings 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 Ichor Holdings will offset losses from the drop in Ichor Holdings' long position.
The idea behind Applied Materials and Ichor Holdings 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.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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