Correlation Between Applied Materials and Vale SA
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Vale 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 Vale 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 Vale SA, you can compare the effects of market volatilities on Applied Materials and Vale 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Vale SA.
Diversification Opportunities for Applied Materials and Vale SA
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Vale is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Applied Materials i.e., Applied Materials and Vale SA go up and down completely randomly.
Pair Corralation between Applied Materials and Vale SA
Assuming the 90 days horizon Applied Materials is expected to generate 2.37 times more return on investment than Vale SA. However, Applied Materials is 2.37 times more volatile than Vale SA. It trades about 0.1 of its potential returns per unit of risk. Vale SA is currently generating about 0.14 per unit of risk. If you would invest 16,252 in Applied Materials on July 21, 2025 and sell it today you would earn a total of 2,934 from holding Applied Materials or generate 18.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Vale SA
Performance |
| Timeline |
| Applied Materials |
| Vale SA |
Applied Materials and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Vale SA
The main advantage of trading using opposite Applied Materials and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Vale 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 Vale SA will offset losses from the drop in Vale SA's long position.| Applied Materials vs. ARROW ELECTRONICS | Applied Materials vs. NEWELL RUBBERMAID | Applied Materials vs. UNIVERSAL MUSIC GROUP | Applied Materials vs. United Microelectronics Corp |
| Vale SA vs. BII Railway Transportation | Vale SA vs. EVS Broadcast Equipment | Vale SA vs. BROADPEAK SA EO | Vale SA vs. TRAINLINE PLC LS |
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 the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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