Correlation Between Apple and Compania
Can any of the company-specific risk be diversified away by investing in both Apple and Compania 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 Apple and Compania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc DRC and Compania de Transporte, you can compare the effects of market volatilities on Apple and Compania 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 Apple with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Compania.
Diversification Opportunities for Apple and Compania
Pay attention - limited upside
The 3 months correlation between Apple and Compania is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc DRC and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte and Apple 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 Apple Inc DRC are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Apple i.e., Apple and Compania go up and down completely randomly.
Pair Corralation between Apple and Compania
Assuming the 90 days trading horizon Apple is expected to generate 2.3 times less return on investment than Compania. But when comparing it to its historical volatility, Apple Inc DRC is 1.08 times less risky than Compania. It trades about 0.08 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 13,975 in Compania de Transporte on August 26, 2024 and sell it today you would earn a total of 200,525 from holding Compania de Transporte or generate 1434.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc DRC vs. Compania de Transporte
Performance |
| Timeline |
| Apple Inc DRC |
| Compania de Transporte |
Apple and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Compania
The main advantage of trading using opposite Apple and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.| Apple vs. Compania de Transporte | Apple vs. Transportadora de Gas | Apple vs. Harmony Gold Mining | Apple vs. Agrometal SAI |
| Compania vs. Pampa Energia SA | Compania vs. United States Steel | Compania vs. Pfizer Inc | Compania vs. Distribuidora de Gas |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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