Correlation Between Apple and PetroShale
Can any of the company-specific risk be diversified away by investing in both Apple and PetroShale 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 PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and PetroShale, you can compare the effects of market volatilities on Apple and PetroShale 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 PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and PetroShale.
Diversification Opportunities for Apple and PetroShale
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Apple and PetroShale is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale 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 PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Apple i.e., Apple and PetroShale go up and down completely randomly.
Pair Corralation between Apple and PetroShale
Given the investment horizon of 90 days Apple Inc is expected to under-perform the PetroShale. In addition to that, Apple is 1.4 times more volatile than PetroShale. It trades about -0.08 of its total potential returns per unit of risk. PetroShale is currently generating about 0.13 per unit of volatility. If you would invest 29.00 in PetroShale on November 3, 2024 and sell it today you would earn a total of 1.00 from holding PetroShale or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. PetroShale
Performance |
| Timeline |
| Apple Inc |
| PetroShale |
Apple and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and PetroShale
The main advantage of trading using opposite Apple and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, PetroShale 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 PetroShale will offset losses from the drop in PetroShale's long position.The idea behind Apple Inc and PetroShale 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.| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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