Correlation Between Applied Materials and KraneShares

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

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

Diversification Opportunities for Applied Materials and KraneShares

-0.04

Correlation Coefficient

Applied Materials  KraneShares

Good diversification

The 3 months correlation between Applied and KraneShares is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares 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 KraneShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares has no effect on the direction of Applied Materials i.e., Applied Materials and KraneShares go up and down completely randomly.

Pair Corralation between Applied Materials and KraneShares

If you would invest (100.00) in KraneShares on January 28, 2024 and sell it today you would earn a total of  100.00  from holding KraneShares or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Applied Materials  vs.  KraneShares

Applied Materials

Risk-Adjusted Performance

11 of 100

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 unsteady basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

KraneShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, KraneShares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Applied Materials and KraneShares

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

The idea behind Applied Materials and KraneShares 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.