Correlation Between Apple and DOCDATA
Can any of the company-specific risk be diversified away by investing in both Apple and DOCDATA 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 DOCDATA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and DOCDATA, you can compare the effects of market volatilities on Apple and DOCDATA 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 DOCDATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and DOCDATA.
Diversification Opportunities for Apple and DOCDATA
Excellent diversification
The 3 months correlation between Apple and DOCDATA is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA 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 DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of Apple i.e., Apple and DOCDATA go up and down completely randomly.
Pair Corralation between Apple and DOCDATA
Assuming the 90 days trading horizon Apple Inc is expected to under-perform the DOCDATA. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.46 times less risky than DOCDATA. The stock trades about -0.42 of its potential returns per unit of risk. The DOCDATA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 38.00 in DOCDATA on October 22, 2024 and sell it today you would earn a total of 0.00 from holding DOCDATA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.12% |
| Values | Daily Returns |
Apple Inc vs. DOCDATA
Performance |
| Timeline |
| Apple Inc |
| DOCDATA |
Apple and DOCDATA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and DOCDATA
The main advantage of trading using opposite Apple and DOCDATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, DOCDATA 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 DOCDATA will offset losses from the drop in DOCDATA's long position.The idea behind Apple Inc and DOCDATA 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.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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