Correlation Between Apple and US Financial
Can any of the company-specific risk be diversified away by investing in both Apple and US 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 US 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 US Financial 15, you can compare the effects of market volatilities on Apple and US 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and US Financial.
Diversification Opportunities for Apple and US Financial
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Apple and FTU is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Apple i.e., Apple and US Financial go up and down completely randomly.
Pair Corralation between Apple and US Financial
Assuming the 90 days trading horizon Apple is expected to generate 34.8 times less return on investment than US Financial. But when comparing it to its historical volatility, Apple Inc CDR is 12.1 times less risky than US Financial. It trades about 0.11 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 36.00 in US Financial 15 on August 31, 2024 and sell it today you would earn a total of 33.00 from holding US Financial 15 or generate 91.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc CDR vs. US Financial 15
Performance |
| Timeline |
| Apple Inc CDR |
| US Financial 15 |
Apple and US Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and US Financial
The main advantage of trading using opposite Apple and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, US 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 US Financial will offset losses from the drop in US Financial's long position.| Apple vs. Renoworks Software | Apple vs. AGF Management Limited | Apple vs. Sparx Technology | Apple vs. Data Communications Management |
| US Financial vs. iShares Canadian HYBrid | US Financial vs. Brompton European Dividend | US Financial vs. Solar Alliance Energy | US Financial vs. PHN Multi Style All Cap |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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