Correlation Between Applied Materials and SmarTone Telecommunicatio

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

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

Diversification Opportunities for Applied Materials and SmarTone Telecommunicatio

0.49

Correlation Coefficient

Applied Materials  SmarTone Telecommunicatio

Very weak diversification

The 3 months correlation between Applied and SmarTone is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and SmarTone Telecommunications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmarTone Telecommunicatio 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 SmarTone Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmarTone Telecommunicatio has no effect on the direction of Applied Materials i.e., Applied Materials and SmarTone Telecommunicatio go up and down completely randomly.

Pair Corralation between Applied Materials and SmarTone Telecommunicatio

Assuming the 90 days horizon Applied Materials is expected to generate 1.78 times more return on investment than SmarTone Telecommunicatio. However, Applied Materials is 1.78 times more volatile than SmarTone Telecommunications Holdings. It trades about 0.19 of its potential returns per unit of risk. SmarTone Telecommunications Holdings is currently generating about 0.08 per unit of risk. If you would invest  12,509  in Applied Materials on April 23, 2025 and sell it today you would earn a total of  4,049  from holding Applied Materials or generate 32.37% 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.  SmarTone Telecommunications Ho

Applied Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

SmarTone Telecommunicatio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SmarTone Telecommunications Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SmarTone Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Applied Materials and SmarTone Telecommunicatio

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

The idea behind Applied Materials and SmarTone Telecommunications Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.