Correlation Between Alphabet and Applied Materials

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

By analyzing existing cross correlation between Alphabet Inc Class C and Applied Materials, you can compare the effects of market volatilities on Alphabet and Applied Materials 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 Alphabet with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Applied Materials.

Diversification Opportunities for Alphabet and Applied Materials

0.55

Correlation Coefficient

Alphabet  Applied Materials

Very weak diversification

The 3 months correlation between Alphabet and Applied is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Alphabet i.e., Alphabet and Applied Materials go up and down completely randomly.

Pair Corralation between Alphabet and Applied Materials

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.76 times more return on investment than Applied Materials. However, Alphabet Inc Class C is 1.31 times less risky than Applied Materials. It trades about 0.33 of its potential returns per unit of risk. Applied Materials is currently generating about 0.21 per unit of risk. If you would invest  20,776  in Alphabet Inc Class C on August 26, 2025 and sell it today you would earn a total of  11,071  from holding Alphabet Inc Class C or generate 53.29% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Applied Materials

Alphabet Class C

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Applied Materials

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

The idea behind Alphabet Inc Class C and Applied Materials 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.