Correlation Between Applied Materials, and Great West

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

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

Diversification Opportunities for Applied Materials, and Great West

0.46

Correlation Coefficient

Applied Materials,  Great West

Very weak diversification

The 3 months correlation between Applied and Great is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Applied Materials, i.e., Applied Materials, and Great West go up and down completely randomly.

Pair Corralation between Applied Materials, and Great West

Assuming the 90 days trading horizon Applied Materials, is expected to generate 2.72 times more return on investment than Great West. However, Applied Materials, is 2.72 times more volatile than Great West Lifeco. It trades about 0.13 of its potential returns per unit of risk. Great West Lifeco is currently generating about 0.13 per unit of risk. If you would invest  1,887  in Applied Materials, on March 21, 2025 and sell it today you would earn a total of  87.00  from holding Applied Materials, or generate 4.61% return on investment over 90 days.

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

Applied Materials,  vs.  Great West Lifeco

Applied Materials,

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Applied Materials, exhibited solid returns over the last few months and may actually be approaching a breakup point.

Great West Lifeco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Lifeco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great West is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Applied Materials, and Great West

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

The idea behind Applied Materials, and Great West Lifeco 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.