Correlation Between Apple and Government Bond
Can any of the company-specific risk be diversified away by investing in both Apple and Government Bond 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 Government Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Government Bond Fund, you can compare the effects of market volatilities on Apple and Government Bond 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 Government Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Government Bond.
Diversification Opportunities for Apple and Government Bond
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Apple and Government is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Government Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Bond 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 Government Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Bond has no effect on the direction of Apple i.e., Apple and Government Bond go up and down completely randomly.
Pair Corralation between Apple and Government Bond
Given the investment horizon of 90 days Apple Inc is expected to under-perform the Government Bond. In addition to that, Apple is 6.14 times more volatile than Government Bond Fund. It trades about -0.08 of its total potential returns per unit of risk. Government Bond Fund is currently generating about 0.06 per unit of volatility. If you would invest 920.00 in Government Bond Fund on November 3, 2024 and sell it today you would earn a total of 3.00 from holding Government Bond Fund or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Government Bond Fund
Performance |
| Timeline |
| Apple Inc |
| Government Bond |
Apple and Government Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Government Bond
The main advantage of trading using opposite Apple and Government Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Government Bond 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 Government Bond will offset losses from the drop in Government Bond's long position.The idea behind Apple Inc and Government Bond Fund 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.| Government Bond vs. Inflation Adjusted Bond Fund | Government Bond vs. Ginnie Mae Fund | Government Bond vs. Short Term Government Fund | Government Bond vs. Diversified Bond Fund |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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