Correlation Between Applied Materials and Tokyu Construction

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

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

Diversification Opportunities for Applied Materials and Tokyu Construction

0.76

Correlation Coefficient

Applied Materials  Tokyu Construction

Poor diversification

The 3 months correlation between Applied and Tokyu is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction 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 Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of Applied Materials i.e., Applied Materials and Tokyu Construction go up and down completely randomly.

Pair Corralation between Applied Materials and Tokyu Construction

Assuming the 90 days horizon Applied Materials is expected to generate 1.61 times more return on investment than Tokyu Construction. However, Applied Materials is 1.61 times more volatile than Tokyu Construction Co. It trades about 0.19 of its potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.16 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	Significant
Accuracy	100.0%
Values	Daily Returns

Applied Materials  vs.  Tokyu Construction Co

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.

Tokyu Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tokyu Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and Tokyu Construction

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

The idea behind Applied Materials and Tokyu Construction Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.