Correlation Between Apple and Definity Financial
Can any of the company-specific risk be diversified away by investing in both Apple and Definity Financial 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 Definity Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc CDR and Definity Financial Corp, you can compare the effects of market volatilities on Apple and Definity Financial 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 Definity Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Definity Financial.
Diversification Opportunities for Apple and Definity Financial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Definity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Definity Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definity Financial Corp 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 CDR are associated (or correlated) with Definity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definity Financial Corp has no effect on the direction of Apple i.e., Apple and Definity Financial go up and down completely randomly.
Pair Corralation between Apple and Definity Financial
Assuming the 90 days trading horizon Apple is expected to generate 1.77 times less return on investment than Definity Financial. But when comparing it to its historical volatility, Apple Inc CDR is 1.31 times less risky than Definity Financial. It trades about 0.25 of its potential returns per unit of risk. Definity Financial Corp is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 5,373 in Definity Financial Corp on September 1, 2024 and sell it today you would earn a total of 480.00 from holding Definity Financial Corp or generate 8.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc CDR vs. Definity Financial Corp
Performance |
| Timeline |
| Apple Inc CDR |
| Definity Financial Corp |
Apple and Definity Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Definity Financial
The main advantage of trading using opposite Apple and Definity Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Definity Financial 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 Definity Financial will offset losses from the drop in Definity Financial's long position.The idea behind Apple Inc CDR and Definity Financial Corp 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.| Definity Financial vs. Trisura Group | Definity Financial vs. Pet Valu Holdings | Definity Financial vs. Intact Financial | Definity Financial vs. Topaz Energy Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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