Correlation Between BROADPEAK and Applied Materials

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

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

Diversification Opportunities for BROADPEAK and Applied Materials

0.58

Correlation Coefficient

BROADPEAK  Applied Materials

Very weak diversification

The 3 months correlation between BROADPEAK and Applied is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BROADPEAK SA EO and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and BROADPEAK 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 BROADPEAK SA EO 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 BROADPEAK i.e., BROADPEAK and Applied Materials go up and down completely randomly.

Pair Corralation between BROADPEAK and Applied Materials

Assuming the 90 days horizon BROADPEAK is expected to generate 3.54 times less return on investment than Applied Materials. In addition to that, BROADPEAK is 1.33 times more volatile than Applied Materials. It trades about 0.05 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.22 per unit of volatility. If you would invest  11,827  in Applied Materials on April 20, 2025 and sell it today you would earn a total of  4,731  from holding Applied Materials or generate 40.0% return on investment over 90 days.

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

BROADPEAK SA EO  vs.  Applied Materials

BROADPEAK SA EO

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BROADPEAK SA EO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BROADPEAK may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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. Despite nearly fragile basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BROADPEAK and Applied Materials

The main advantage of trading using opposite BROADPEAK and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BROADPEAK 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 BROADPEAK SA EO 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.