Correlation Between Apple and Western Investment
Can any of the company-specific risk be diversified away by investing in both Apple and Western Investment 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 Western Investment 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 Western Investment, you can compare the effects of market volatilities on Apple and Western Investment 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 Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Western Investment.
Diversification Opportunities for Apple and Western Investment
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Apple and Western is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Apple i.e., Apple and Western Investment go up and down completely randomly.
Pair Corralation between Apple and Western Investment
Assuming the 90 days trading horizon Apple is expected to generate 1.72 times less return on investment than Western Investment. But when comparing it to its historical volatility, Apple Inc CDR is 2.93 times less risky than Western Investment. It trades about 0.07 of its potential returns per unit of risk. Western Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 31.00 in Western Investment on August 26, 2024 and sell it today you would earn a total of 11.00 from holding Western Investment or generate 35.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc CDR vs. Western Investment
Performance |
| Timeline |
| Apple Inc CDR |
| Western Investment |
Apple and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Western Investment
The main advantage of trading using opposite Apple and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| Apple vs. MTY Food Group | Apple vs. Nicola Mining | Apple vs. Metalero Mining Corp | Apple vs. Maple Leaf Foods |
| Western Investment vs. NVIDIA CDR | Western Investment vs. Apple Inc CDR | Western Investment vs. Microsoft Corp CDR | Western Investment vs. Amazon CDR |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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