Correlation Between Apple and N2ET34
Can any of the company-specific risk be diversified away by investing in both Apple and N2ET34 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 N2ET34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and N2ET34, you can compare the effects of market volatilities on Apple and N2ET34 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 N2ET34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and N2ET34.
Diversification Opportunities for Apple and N2ET34
Almost no diversification
The 3 months correlation between Apple and N2ET34 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and N2ET34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N2ET34 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 N2ET34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N2ET34 has no effect on the direction of Apple i.e., Apple and N2ET34 go up and down completely randomly.
Pair Corralation between Apple and N2ET34
Assuming the 90 days trading horizon Apple is expected to generate 1.41 times less return on investment than N2ET34. But when comparing it to its historical volatility, Apple Inc is 2.92 times less risky than N2ET34. It trades about 0.75 of its potential returns per unit of risk. N2ET34 is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 3,078 in N2ET34 on September 20, 2024 and sell it today you would earn a total of 862.00 from holding N2ET34 or generate 28.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. N2ET34
Performance |
| Timeline |
| Apple Inc |
| N2ET34 |
Apple and N2ET34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and N2ET34
The main advantage of trading using opposite Apple and N2ET34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, N2ET34 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 N2ET34 will offset losses from the drop in N2ET34's long position.The idea behind Apple Inc and N2ET34 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.| N2ET34 vs. Taiwan Semiconductor Manufacturing | N2ET34 vs. Apple Inc | N2ET34 vs. Alibaba Group Holding | N2ET34 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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