Correlation Between Apple and CHINA MERCHANTS
Can any of the company-specific risk be diversified away by investing in both Apple and CHINA MERCHANTS 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 CHINA MERCHANTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and CHINA MERCHANTS, you can compare the effects of market volatilities on Apple and CHINA MERCHANTS 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 CHINA MERCHANTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and CHINA MERCHANTS.
Diversification Opportunities for Apple and CHINA MERCHANTS
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and CHINA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CHINA MERCHANTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA MERCHANTS 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 CHINA MERCHANTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA MERCHANTS has no effect on the direction of Apple i.e., Apple and CHINA MERCHANTS go up and down completely randomly.
Pair Corralation between Apple and CHINA MERCHANTS
Assuming the 90 days trading horizon Apple is expected to generate 5.47 times less return on investment than CHINA MERCHANTS. But when comparing it to its historical volatility, Apple Inc is 3.24 times less risky than CHINA MERCHANTS. It trades about 0.07 of its potential returns per unit of risk. CHINA MERCHANTS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 42.00 in CHINA MERCHANTS on August 26, 2024 and sell it today you would earn a total of 108.00 from holding CHINA MERCHANTS or generate 257.14% 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. CHINA MERCHANTS
Performance |
| Timeline |
| Apple Inc |
| CHINA MERCHANTS |
Apple and CHINA MERCHANTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and CHINA MERCHANTS
The main advantage of trading using opposite Apple and CHINA MERCHANTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, CHINA MERCHANTS 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 CHINA MERCHANTS will offset losses from the drop in CHINA MERCHANTS's long position.| Apple vs. Infrastrutture Wireless Italiane | Apple vs. KENNAMETAL INC | Apple vs. MAVEN WIRELESS SWEDEN | Apple vs. GRIFFIN MINING LTD |
| CHINA MERCHANTS vs. Ameriprise Financial | CHINA MERCHANTS vs. QBE Insurance Group | CHINA MERCHANTS vs. Grupo Carso SAB | CHINA MERCHANTS vs. Chiba Bank |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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