Correlation Between Apple and Power Metal
Can any of the company-specific risk be diversified away by investing in both Apple and Power Metal 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 Power Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Power Metal Resources, you can compare the effects of market volatilities on Apple and Power Metal 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 Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Power Metal.
Diversification Opportunities for Apple and Power Metal
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Apple and Power is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Apple i.e., Apple and Power Metal go up and down completely randomly.
Pair Corralation between Apple and Power Metal
Given the investment horizon of 90 days Apple Inc is expected to generate 0.6 times more return on investment than Power Metal. However, Apple Inc is 1.65 times less risky than Power Metal. It trades about -0.08 of its potential returns per unit of risk. Power Metal Resources is currently generating about -0.1 per unit of risk. If you would invest 24,385 in Apple Inc on November 3, 2024 and sell it today you would lose (785.00) from holding Apple Inc or give up 3.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Apple Inc vs. Power Metal Resources
Performance |
| Timeline |
| Apple Inc |
| Power Metal Resources |
Apple and Power Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Power Metal
The main advantage of trading using opposite Apple and Power Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Power Metal 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 Power Metal will offset losses from the drop in Power Metal's long position.The idea behind Apple Inc and Power Metal Resources 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.| Power Metal vs. American Homes 4 | Power Metal vs. Universal Music Group | Power Metal vs. Applied Materials | Power Metal vs. Cairo Communication SpA |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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