Correlation Between Applied Materials, and Advent Wireless

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

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

Diversification Opportunities for Applied Materials, and Advent Wireless

-0.56

Correlation Coefficient

Applied Materials,  Advent Wireless

Excellent diversification

The 3 months correlation between Applied and Advent is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless 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 Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of Applied Materials, i.e., Applied Materials, and Advent Wireless go up and down completely randomly.

Pair Corralation between Applied Materials, and Advent Wireless

Assuming the 90 days trading horizon Applied Materials, is expected to generate 0.82 times more return on investment than Advent Wireless. However, Applied Materials, is 1.22 times less risky than Advent Wireless. It trades about 0.25 of its potential returns per unit of risk. Advent Wireless is currently generating about -0.07 per unit of risk. If you would invest  1,552  in Applied Materials, on April 21, 2025 and sell it today you would earn a total of  619.00  from holding Applied Materials, or generate 39.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Applied Materials,  vs.  Advent Wireless

Applied Materials,

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials, are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Applied Materials, exhibited solid returns over the last few months and may actually be approaching a breakup point.

Advent Wireless

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advent Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Applied Materials, and Advent Wireless

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

The idea behind Applied Materials, and Advent Wireless 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 Anywhere module to track or share privately all of your investments from the convenience of any device.