Correlation Between Apple and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both Apple and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and IMPERIAL TOBACCO , you can compare the effects of market volatilities on Apple and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and IMPERIAL TOBACCO.
Diversification Opportunities for Apple and IMPERIAL TOBACCO
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and IMPERIAL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of Apple i.e., Apple and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between Apple and IMPERIAL TOBACCO
Assuming the 90 days trading horizon Apple is expected to generate 5.59 times less return on investment than IMPERIAL TOBACCO. In addition to that, Apple is 1.08 times more volatile than IMPERIAL TOBACCO . It trades about 0.06 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.38 per unit of volatility. If you would invest 2,772 in IMPERIAL TOBACCO on August 28, 2024 and sell it today you would earn a total of 279.00 from holding IMPERIAL TOBACCO or generate 10.06% 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. IMPERIAL TOBACCO
Performance |
| Timeline |
| Apple Inc |
| IMPERIAL TOBACCO |
Apple and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and IMPERIAL TOBACCO
The main advantage of trading using opposite Apple and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.The idea behind Apple Inc and IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. Pure Storage | IMPERIAL TOBACCO vs. Stewart Information Services | IMPERIAL TOBACCO vs. CVS Health | IMPERIAL TOBACCO vs. National Health Investors |
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 Stocks Directory module to find actively traded stocks across global markets.
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