Correlation Between Apple and FACT II
Can any of the company-specific risk be diversified away by investing in both Apple and FACT II 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 FACT II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and FACT II Acquisition, you can compare the effects of market volatilities on Apple and FACT II 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 FACT II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and FACT II.
Diversification Opportunities for Apple and FACT II
Very good diversification
The 3 months correlation between Apple and FACT is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and FACT II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FACT II Acquisition 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 FACT II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FACT II Acquisition has no effect on the direction of Apple i.e., Apple and FACT II go up and down completely randomly.
Pair Corralation between Apple and FACT II
Given the investment horizon of 90 days Apple Inc is expected to under-perform the FACT II. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 6.87 times less risky than FACT II. The stock trades about -0.08 of its potential returns per unit of risk. The FACT II Acquisition is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,174 in FACT II Acquisition on November 3, 2024 and sell it today you would earn a total of 96.00 from holding FACT II Acquisition or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. FACT II Acquisition
Performance |
| Timeline |
| Apple Inc |
| FACT II Acquisition |
Apple and FACT II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and FACT II
The main advantage of trading using opposite Apple and FACT II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, FACT II 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 FACT II will offset losses from the drop in FACT II's long position.The idea behind Apple Inc and FACT II Acquisition 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.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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