Correlation Between Apple and T MOBILE
Can any of the company-specific risk be diversified away by investing in both Apple and T MOBILE 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 T MOBILE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and T MOBILE US, you can compare the effects of market volatilities on Apple and T MOBILE 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 T MOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and T MOBILE.
Diversification Opportunities for Apple and T MOBILE
Very poor diversification
The 3 months correlation between Apple and TM5 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and T MOBILE US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T MOBILE US 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 T MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T MOBILE US has no effect on the direction of Apple i.e., Apple and T MOBILE go up and down completely randomly.
Pair Corralation between Apple and T MOBILE
Assuming the 90 days trading horizon Apple is expected to generate 1.54 times less return on investment than T MOBILE. In addition to that, Apple is 1.27 times more volatile than T MOBILE US. It trades about 0.08 of its total potential returns per unit of risk. T MOBILE US is currently generating about 0.16 per unit of volatility. If you would invest 14,081 in T MOBILE US on September 12, 2024 and sell it today you would earn a total of 8,079 from holding T MOBILE US or generate 57.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. T MOBILE US
Performance |
| Timeline |
| Apple Inc |
| T MOBILE US |
Apple and T MOBILE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and T MOBILE
The main advantage of trading using opposite Apple and T MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, T MOBILE 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 T MOBILE will offset losses from the drop in T MOBILE's long position.| Apple vs. ON SEMICONDUCTOR | Apple vs. Burlington Stores | Apple vs. National Retail Properties | Apple vs. Goosehead Insurance |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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