Correlation Between Applied Materials and Restore Plc

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

By analyzing existing cross correlation between Applied Materials and Restore plc, you can compare the effects of market volatilities on Applied Materials and Restore Plc 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 Restore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Restore Plc.

Diversification Opportunities for Applied Materials and Restore Plc

0.78

Correlation Coefficient

Applied Materials  Restore Plc

Poor diversification

The 3 months correlation between Applied and Restore is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Restore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restore plc 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 Restore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restore plc has no effect on the direction of Applied Materials i.e., Applied Materials and Restore Plc go up and down completely randomly.

Pair Corralation between Applied Materials and Restore Plc

Assuming the 90 days trading horizon Applied Materials is expected to generate 1.32 times more return on investment than Restore Plc. However, Applied Materials is 1.32 times more volatile than Restore plc. It trades about 0.27 of its potential returns per unit of risk. Restore plc is currently generating about 0.21 per unit of risk. If you would invest  13,651  in Applied Materials on April 20, 2025 and sell it today you would earn a total of  5,609  from holding Applied Materials or generate 41.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Applied Materials  vs.  Restore plc

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Restore plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Restore plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Restore Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and Restore Plc

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

The idea behind Applied Materials and Restore plc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.