Correlation Between Apple and New Energy
Can any of the company-specific risk be diversified away by investing in both Apple and New Energy 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 New Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and New Energy Metals, you can compare the effects of market volatilities on Apple and New Energy 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 New Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and New Energy.
Diversification Opportunities for Apple and New Energy
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Apple and New is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and New Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Energy Metals 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 New Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Energy Metals has no effect on the direction of Apple i.e., Apple and New Energy go up and down completely randomly.
Pair Corralation between Apple and New Energy
Given the investment horizon of 90 days Apple is expected to generate 5.64 times less return on investment than New Energy. But when comparing it to its historical volatility, Apple Inc is 9.6 times less risky than New Energy. It trades about 0.08 of its potential returns per unit of risk. New Energy Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 20.00 in New Energy Metals on September 1, 2024 and sell it today you would earn a total of 11.00 from holding New Energy Metals or generate 55.0% 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 vs. New Energy Metals
Performance |
| Timeline |
| Apple Inc |
| New Energy Metals |
Apple and New Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and New Energy
The main advantage of trading using opposite Apple and New Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, New Energy 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 New Energy will offset losses from the drop in New Energy's long position.The idea behind Apple Inc and New Energy Metals 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.| New Energy vs. Legacy Education | New Energy vs. Apple Inc | New Energy vs. NVIDIA | New Energy vs. Microsoft |
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 CEOs Directory module to screen CEOs from public companies around the world.
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