Correlation Between Sumco Corp and Applied Materials

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

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

Diversification Opportunities for Sumco Corp and Applied Materials

0.53

Correlation Coefficient

Sumco Corp  Applied Materials

Very weak diversification

The 3 months correlation between Sumco and Applied is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sumco Corp ADR and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Sumco Corp 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 Sumco Corp ADR 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 Sumco Corp i.e., Sumco Corp and Applied Materials go up and down completely randomly.

Pair Corralation between Sumco Corp and Applied Materials

Assuming the 90 days horizon Sumco Corp is expected to generate 2.13 times less return on investment than Applied Materials. In addition to that, Sumco Corp is 1.25 times more volatile than Applied Materials. It trades about 0.04 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.12 per unit of volatility. If you would invest  14,486  in Applied Materials on February 23, 2024 and sell it today you would earn a total of  7,329  from holding Applied Materials or generate 50.59% return on investment over 90 days.

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

Sumco Corp ADR  vs.  Applied Materials

Sumco Corp ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumco Corp ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sumco Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Applied Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Applied Materials may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sumco Corp and Applied Materials

The main advantage of trading using opposite Sumco Corp and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumco Corp 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 Sumco Corp ADR 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.

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.