Correlation Between SCOTT TECHNOLOGY and APPLIED MATERIALS

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

By analyzing existing cross correlation between SCOTT TECHNOLOGY and APPLIED MATERIALS, you can compare the effects of market volatilities on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY with a short position of APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOTT TECHNOLOGY and APPLIED MATERIALS.

Diversification Opportunities for SCOTT TECHNOLOGY and APPLIED MATERIALS

0.62

Correlation Coefficient

SCOTT TECHNOLOGY  APPLIED MATERIALS

Poor diversification

The 3 months correlation between SCOTT and APPLIED is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and APPLIED MATERIALS

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to under-perform the APPLIED MATERIALS. In addition to that, SCOTT TECHNOLOGY is 1.27 times more volatile than APPLIED MATERIALS. It trades about -0.01 of its total potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.24 per unit of volatility. If you would invest  14,986  in APPLIED MATERIALS on April 20, 2025 and sell it today you would earn a total of  1,384  from holding APPLIED MATERIALS or generate 9.24% return on investment over 90 days.

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

SCOTT TECHNOLOGY  vs.  APPLIED MATERIALS

SCOTT TECHNOLOGY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY exhibited 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 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.

Pair Trading with SCOTT TECHNOLOGY and APPLIED MATERIALS

The main advantage of trading using opposite SCOTT TECHNOLOGY and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY 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's long position.

The idea behind SCOTT TECHNOLOGY 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.