Correlation Between Applied Materials and Daqo New

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Can any of the company-specific risk be diversified away by investing in both Applied Materials and Daqo New 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 Daqo New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Daqo New Energy, you can compare the effects of market volatilities on Applied Materials and Daqo New 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 Daqo New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Daqo New.

Diversification Opportunities for Applied Materials and Daqo New

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Applied and Daqo New is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Daqo New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daqo New Energy 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 Daqo New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daqo New Energy has no effect on the direction of Applied Materials i.e., Applied Materials and Daqo New go up and down completely randomly.

Pair Corralation between Applied Materials and Daqo New

Given the investment horizon of 90 days Applied Materials is expected to generate 0.65 times more return on investment than Daqo New. However, Applied Materials is 1.53 times less risky than Daqo New. It trades about -0.01 of its potential returns per unit of risk. Daqo New Energy is currently generating about -0.16 per unit of risk. If you would invest  9,029  in Applied Materials on July 7, 2022 and sell it today you would lose (88.00)  from holding Applied Materials or give up 0.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Applied Materials  vs.  Daqo New Energy

 Performance (%) 
       Timeline  
Applied Materials 
Applied Performance
0 of 100
Over the last 90 days Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Applied Materials is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Applied Price Channel

Daqo New Energy 
Daqo New Performance
0 of 100
Over the last 90 days Daqo New Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in November 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Daqo New Price Channel

Applied Materials and Daqo New Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Applied Materials and Daqo New

The main advantage of trading using opposite Applied Materials and Daqo New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Daqo New 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 Daqo New will offset losses from the drop in Daqo New's long position.
Applied Materials vs. Amazon Inc
The idea behind Applied Materials and Daqo New Energy 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.
Daqo New vs. Amazon Inc
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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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