Correlation Between Apple and Associated British
Can any of the company-specific risk be diversified away by investing in both Apple and Associated British 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 Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Associated British Foods, you can compare the effects of market volatilities on Apple and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Associated British.
Diversification Opportunities for Apple and Associated British
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Apple and Associated is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Apple i.e., Apple and Associated British go up and down completely randomly.
Pair Corralation between Apple and Associated British
Assuming the 90 days trading horizon Apple Inc is expected to generate 1.3 times more return on investment than Associated British. However, Apple is 1.3 times more volatile than Associated British Foods. It trades about -0.11 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.16 per unit of risk. If you would invest 24,230 in Apple Inc on November 2, 2024 and sell it today you would lose (1,330) from holding Apple Inc or give up 5.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Apple Inc vs. Associated British Foods
Performance |
| Timeline |
| Apple Inc |
| Associated British Foods |
Apple and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Associated British
The main advantage of trading using opposite Apple and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Apple vs. China Communications Services | Apple vs. China Datang | Apple vs. HUTCHISON TELECOMM | Apple vs. Spirent Communications plc |
| Associated British vs. Delta Air Lines | Associated British vs. SAN MIGUEL BREWERY | Associated British vs. THAI BEVERAGE | Associated British vs. Monster Beverage Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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