Correlation Between Apple and X FAB
Can any of the company-specific risk be diversified away by investing in both Apple and X FAB 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 X FAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and X FAB Silicon Foundries, you can compare the effects of market volatilities on Apple and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and X FAB.
Diversification Opportunities for Apple and X FAB
Good diversification
The 3 months correlation between Apple and XFB is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Apple i.e., Apple and X FAB go up and down completely randomly.
Pair Corralation between Apple and X FAB
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.55 times more return on investment than X FAB. However, Apple Inc is 1.83 times less risky than X FAB. It trades about 0.08 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.08 per unit of risk. If you would invest 17,419 in Apple Inc on September 14, 2024 and sell it today you would earn a total of 6,241 from holding Apple Inc or generate 35.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Apple Inc |
| X FAB Silicon |
Apple and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and X FAB
The main advantage of trading using opposite Apple and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.| Apple vs. Soken Chemical Engineering | Apple vs. SEKISUI CHEMICAL | Apple vs. Shin Etsu Chemical Co | Apple vs. KINGBOARD CHEMICAL |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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