Correlation Between Apple and Ace Hardware
Can any of the company-specific risk be diversified away by investing in both Apple and Ace Hardware 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 Ace Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Ace Hardware Indonesia, you can compare the effects of market volatilities on Apple and Ace Hardware 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 Ace Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Ace Hardware.
Diversification Opportunities for Apple and Ace Hardware
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Apple and Ace is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia 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 are associated (or correlated) with Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of Apple i.e., Apple and Ace Hardware go up and down completely randomly.
Pair Corralation between Apple and Ace Hardware
Given the investment horizon of 90 days Apple Inc is expected to under-perform the Ace Hardware. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.39 times less risky than Ace Hardware. The stock trades about -0.39 of its potential returns per unit of risk. The Ace Hardware Indonesia is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 81,000 in Ace Hardware Indonesia on October 22, 2024 and sell it today you would lose (5,500) from holding Ace Hardware Indonesia or give up 6.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Apple Inc vs. Ace Hardware Indonesia
Performance |
| Timeline |
| Apple Inc |
| Ace Hardware Indonesia |
Apple and Ace Hardware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Ace Hardware
The main advantage of trading using opposite Apple and Ace Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Ace Hardware 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 Ace Hardware will offset losses from the drop in Ace Hardware's long position.The idea behind Apple Inc and Ace Hardware Indonesia 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.| Ace Hardware vs. Japfa Comfeed Indonesia | Ace Hardware vs. Charoen Pokphand Indonesia | Ace Hardware vs. Erajaya Swasembada Tbk | Ace Hardware vs. Indofood Cbp Sukses |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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