Correlation Between Applied Materials and Analog Devices

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

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

Diversification Opportunities for Applied Materials and Analog Devices

-0.74

Correlation Coefficient

Applied Materials  Analog Devices

Pay attention - limited upside

The 3 months correlation between Applied and Analog is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Applied Materials i.e., Applied Materials and Analog Devices go up and down completely randomly.

Pair Corralation between Applied Materials and Analog Devices

Given the investment horizon of 90 days Applied Materials is expected to generate 1.63 times more return on investment than Analog Devices. However, Applied Materials is 1.63 times more volatile than Analog Devices. It trades about 0.2 of its potential returns per unit of risk. Analog Devices is currently generating about -0.07 per unit of risk. If you would invest  16,167  in Applied Materials on August 24, 2025 and sell it today you would earn a total of  6,234  from holding Applied Materials or generate 38.56% return on investment over 90 days.

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

Applied Materials  vs.  Analog Devices

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

Weakest

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Applied Materials and Analog Devices

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

The idea behind Applied Materials and Analog Devices 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.