Correlation Between Applied Materials, and ACT Energy

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

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

Diversification Opportunities for Applied Materials, and ACT Energy

-0.63

Correlation Coefficient

Applied Materials,  ACT Energy

Excellent diversification

The 3 months correlation between Applied and ACT is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and ACT Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACT Energy Technologies 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 ACT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACT Energy Technologies has no effect on the direction of Applied Materials, i.e., Applied Materials, and ACT Energy go up and down completely randomly.

Pair Corralation between Applied Materials, and ACT Energy

Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.48 times more return on investment than ACT Energy. However, Applied Materials, is 1.48 times more volatile than ACT Energy Technologies. It trades about 0.0 of its potential returns per unit of risk. ACT Energy Technologies is currently generating about -0.03 per unit of risk. If you would invest  1,887  in Applied Materials, on May 20, 2025 and sell it today you would lose (27.00) from holding Applied Materials, or give up 1.43% of portfolio value over 90 days.

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

Applied Materials,  vs.  ACT Energy Technologies

Applied Materials,

Risk-Adjusted Performance

Weakest

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

ACT Energy Technologies

Risk-Adjusted Performance

Weakest

Over the last 90 days ACT Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ACT Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Applied Materials, and ACT Energy

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

The idea behind Applied Materials, and ACT Energy Technologies 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.