Correlation Between Applied Materials and Arm Holdings

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

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

Diversification Opportunities for Applied Materials and Arm Holdings

0.74

Correlation Coefficient

Applied Materials  Arm Holdings

Poor diversification

The 3 months correlation between Applied and Arm is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Applied Materials i.e., Applied Materials and Arm Holdings go up and down completely randomly.

Pair Corralation between Applied Materials and Arm Holdings

Given the investment horizon of 90 days Applied Materials is expected to generate 0.76 times more return on investment than Arm Holdings. However, Applied Materials is 1.32 times less risky than Arm Holdings. It trades about 0.3 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.15 per unit of risk. If you would invest  16,451  in Applied Materials on July 27, 2025 and sell it today you would earn a total of  6,424  from holding Applied Materials or generate 39.05% return on investment over 90 days.

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

Applied Materials  vs.  Arm Holdings plc

Applied Materials

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arm Holdings plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Arm Holdings may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Applied Materials and Arm Holdings

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

The idea behind Applied Materials and Arm Holdings plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.