Correlation Between Applied Materials and MEMSCAP SA

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

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

Diversification Opportunities for Applied Materials and MEMSCAP SA

0.78

Correlation Coefficient

Applied Materials  MEMSCAP SA

Poor diversification

The 3 months correlation between Applied and MEMSCAP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and MEMSCAP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEMSCAP SA 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 MEMSCAP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEMSCAP SA has no effect on the direction of Applied Materials i.e., Applied Materials and MEMSCAP SA go up and down completely randomly.

Pair Corralation between Applied Materials and MEMSCAP SA

Assuming the 90 days horizon Applied Materials is expected to generate 1.2 times less return on investment than MEMSCAP SA. But when comparing it to its historical volatility, Applied Materials is 1.85 times less risky than MEMSCAP SA. It trades about 0.1 of its potential returns per unit of risk. MEMSCAP SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  365.00  in MEMSCAP SA on May 17, 2025 and sell it today you would earn a total of  43.00  from holding MEMSCAP SA or generate 11.78% 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.  MEMSCAP SA

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. Despite nearly uncertain basic indicators, Applied Materials may actually be approaching a critical reversion point that can send shares even higher in September 2025.

MEMSCAP SA

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in MEMSCAP SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, MEMSCAP SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and MEMSCAP SA

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

The idea behind Applied Materials and MEMSCAP SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.