Correlation Between APPLIED MATERIALS and Tri Pointe

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

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

Diversification Opportunities for APPLIED MATERIALS and Tri Pointe

0.58

Correlation Coefficient

APPLIED MATERIALS  Tri Pointe

Very weak diversification

The 3 months correlation between APPLIED and Tri is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Tri Pointe Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Pointe Homes 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 Tri Pointe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Pointe Homes has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Tri Pointe go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Tri Pointe

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.12 times more return on investment than Tri Pointe. However, APPLIED MATERIALS is 1.12 times more volatile than Tri Pointe Homes. It trades about 0.15 of its potential returns per unit of risk. Tri Pointe Homes is currently generating about 0.04 per unit of risk. If you would invest  13,099  in APPLIED MATERIALS on April 24, 2025 and sell it today you would earn a total of  2,823  from holding APPLIED MATERIALS or generate 21.55% 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.  Tri Pointe Homes

APPLIED MATERIALS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 11 (%) 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.

Tri Pointe Homes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Pointe Homes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tri Pointe is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with APPLIED MATERIALS and Tri Pointe

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

The idea behind APPLIED MATERIALS and Tri Pointe Homes 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.