Correlation Between Applied Materials and AIXTRON SE

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

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

Diversification Opportunities for Applied Materials and AIXTRON SE

0.93

Correlation Coefficient

Applied Materials  AIXTRON SE

Almost no diversification

The 3 months correlation between Applied and AIXTRON is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and AIXTRON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIXTRON SE 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 AIXTRON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIXTRON SE has no effect on the direction of Applied Materials i.e., Applied Materials and AIXTRON SE go up and down completely randomly.

Pair Corralation between Applied Materials and AIXTRON SE

Assuming the 90 days horizon Applied Materials is expected to generate 1.54 times less return on investment than AIXTRON SE. But when comparing it to its historical volatility, Applied Materials is 1.25 times less risky than AIXTRON SE. It trades about 0.22 of its potential returns per unit of risk. AIXTRON SE is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,938  in AIXTRON SE on April 20, 2025 and sell it today you would earn a total of  1,342  from holding AIXTRON SE or generate 69.25% return on investment over 90 days.

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

Applied Materials  vs.  AIXTRON SE

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

AIXTRON SE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIXTRON SE are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIXTRON SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and AIXTRON SE

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

The idea behind Applied Materials and AIXTRON SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.