Correlation Between Apple and TOTAL ENERGY
Can any of the company-specific risk be diversified away by investing in both Apple and TOTAL 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 TOTAL 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 TOTAL ENERGY SERVS, you can compare the effects of market volatilities on Apple and TOTAL 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 TOTAL ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and TOTAL ENERGY.
Diversification Opportunities for Apple and TOTAL ENERGY
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and TOTAL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and TOTAL ENERGY SERVS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL ENERGY SERVS 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 TOTAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL ENERGY SERVS has no effect on the direction of Apple i.e., Apple and TOTAL ENERGY go up and down completely randomly.
Pair Corralation between Apple and TOTAL ENERGY
Assuming the 90 days trading horizon Apple is expected to generate 1.78 times less return on investment than TOTAL ENERGY. But when comparing it to its historical volatility, Apple Inc is 2.23 times less risky than TOTAL ENERGY. It trades about 0.51 of its potential returns per unit of risk. TOTAL ENERGY SERVS is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 623.00 in TOTAL ENERGY SERVS on September 4, 2024 and sell it today you would earn a total of 146.00 from holding TOTAL ENERGY SERVS or generate 23.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. TOTAL ENERGY SERVS
Performance |
| Timeline |
| Apple Inc |
| TOTAL ENERGY SERVS |
Apple and TOTAL ENERGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and TOTAL ENERGY
The main advantage of trading using opposite Apple and TOTAL ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, TOTAL 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 TOTAL ENERGY will offset losses from the drop in TOTAL ENERGY's long position.| Apple vs. Liberty Broadband | Apple vs. Gold Road Resources | Apple vs. ScanSource | Apple vs. SOUTHWEST AIRLINES |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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