Correlation Between APPLIED MATERIALS and Canadian Utilities

Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Canadian Utilities 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 Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APPLIED MATERIALS and Canadian Utilities Limited, you can compare the effects of market volatilities on APPLIED MATERIALS and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Canadian Utilities.

Diversification Opportunities for APPLIED MATERIALS and Canadian Utilities

-0.06

Correlation Coefficient

APPLIED MATERIALS  Canadian Utilities

Good diversification

The 3 months correlation between APPLIED and Canadian is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Canadian Utilities go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Canadian Utilities

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 3.33 times more return on investment than Canadian Utilities. However, APPLIED MATERIALS is 3.33 times more volatile than Canadian Utilities Limited. It trades about 0.22 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about 0.05 per unit of risk. If you would invest  12,026  in APPLIED MATERIALS on April 22, 2025 and sell it today you would earn a total of  4,344  from holding APPLIED MATERIALS or generate 36.12% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Canadian Utilities Limited

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. In spite of comparatively uncertain basic indicators, APPLIED MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Canadian Utilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with APPLIED MATERIALS and Canadian Utilities

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

The idea behind APPLIED MATERIALS and Canadian Utilities Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.