Correlation Between Apple and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both Apple and Medtronic PLC 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 Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Medtronic PLC, you can compare the effects of market volatilities on Apple and Medtronic PLC 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 Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Medtronic PLC.
Diversification Opportunities for Apple and Medtronic PLC
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Apple and Medtronic is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Apple i.e., Apple and Medtronic PLC go up and down completely randomly.
Pair Corralation between Apple and Medtronic PLC
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.72 times more return on investment than Medtronic PLC. However, Apple Inc is 1.38 times less risky than Medtronic PLC. It trades about 0.36 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.06 per unit of risk. If you would invest 20,575 in Apple Inc on September 1, 2024 and sell it today you would earn a total of 1,860 from holding Apple Inc or generate 9.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Medtronic PLC
Performance |
| Timeline |
| Apple Inc |
| Medtronic PLC |
Apple and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Medtronic PLC
The main advantage of trading using opposite Apple and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Medtronic PLC 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| Apple vs. Enter Air SA | Apple vs. Wayside Technology Group | Apple vs. DELTA AIR LINES | Apple vs. Align Technology |
| Medtronic PLC vs. Apple Inc | Medtronic PLC vs. Apple Inc | Medtronic PLC vs. Apple Inc | Medtronic PLC vs. Apple Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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