Correlation Between Apple and Fair Isaac
Can any of the company-specific risk be diversified away by investing in both Apple and Fair Isaac 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 Fair Isaac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Fair Isaac Corp, you can compare the effects of market volatilities on Apple and Fair Isaac 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 Fair Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Fair Isaac.
Diversification Opportunities for Apple and Fair Isaac
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Fair is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Apple i.e., Apple and Fair Isaac go up and down completely randomly.
Pair Corralation between Apple and Fair Isaac
Assuming the 90 days trading horizon Apple is expected to generate 5.2 times less return on investment than Fair Isaac. But when comparing it to its historical volatility, Apple Inc is 1.49 times less risky than Fair Isaac. It trades about 0.09 of its potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 154,500 in Fair Isaac Corp on August 28, 2024 and sell it today you would earn a total of 72,900 from holding Fair Isaac Corp or generate 47.18% 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. Fair Isaac Corp
Performance |
| Timeline |
| Apple Inc |
| Fair Isaac Corp |
Apple and Fair Isaac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Fair Isaac
The main advantage of trading using opposite Apple and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Fair Isaac 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 Fair Isaac will offset losses from the drop in Fair Isaac's long position.The idea behind Apple Inc and Fair Isaac Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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