Correlation Between Marvell Technology and Applied Materials

Can any of the company-specific risk be diversified away by investing in both Marvell 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 Marvell 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 Marvell Technology Group and Applied Materials, you can compare the effects of market volatilities on Marvell 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 Marvell Technology with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marvell Technology and Applied Materials.

Diversification Opportunities for Marvell Technology and Applied Materials

0.43

Correlation Coefficient

Marvell Technology  Applied Materials

Very weak diversification

The 3 months correlation between Marvell and Applied is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology Group and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Marvell 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 Marvell Technology Group 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 Marvell Technology i.e., Marvell Technology and Applied Materials go up and down completely randomly.

Pair Corralation between Marvell Technology and Applied Materials

Given the investment horizon of 90 days Marvell Technology Group is expected to under-perform the Applied Materials. In addition to that, Marvell Technology is 1.19 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 -0.02 per unit of volatility. If you would invest  20,925  in Applied Materials on February 10, 2024 and sell it today you would lose (292.00) from holding Applied Materials or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Marvell Technology Group  vs.  Applied Materials

Marvell Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marvell Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Marvell Technology is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Applied Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Applied Materials may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Marvell Technology and Applied Materials

The main advantage of trading using opposite Marvell Technology and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marvell 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' long position.

The idea behind Marvell Technology Group 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.