Correlation Between Intel and Applied Materials

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

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

Diversification Opportunities for Intel and Applied Materials

0.88

Correlation Coefficient

Intel  Applied Materials

Very poor diversification

The 3 months correlation between Intel and Applied is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Intel 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 Intel 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 Intel i.e., Intel and Applied Materials go up and down completely randomly.

Pair Corralation between Intel and Applied Materials

Given the investment horizon of 90 days Intel is expected to generate 1.74 times less return on investment than Applied Materials. In addition to that, Intel is 1.37 times more volatile than Applied Materials. It trades about 0.11 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.26 per unit of volatility. If you would invest  13,791  in Applied Materials on April 22, 2025 and sell it today you would earn a total of  5,253  from holding Applied Materials or generate 38.09% return on investment over 90 days.

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

Intel  vs.  Applied Materials

Intel

Risk-Adjusted Performance

OK

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

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 20 (%) 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.

Pair Trading with Intel and Applied Materials

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

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.