Correlation Between Apple and SOLENO THERAPEUT
Can any of the company-specific risk be diversified away by investing in both Apple and SOLENO THERAPEUT 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 SOLENO THERAPEUT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and SOLENO THERAPEUT DL 001, you can compare the effects of market volatilities on Apple and SOLENO THERAPEUT 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 SOLENO THERAPEUT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and SOLENO THERAPEUT.
Diversification Opportunities for Apple and SOLENO THERAPEUT
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and SOLENO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and SOLENO THERAPEUT DL 001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLENO THERAPEUT 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 SOLENO THERAPEUT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLENO THERAPEUT has no effect on the direction of Apple i.e., Apple and SOLENO THERAPEUT go up and down completely randomly.
Pair Corralation between Apple and SOLENO THERAPEUT
Assuming the 90 days trading horizon Apple is expected to generate 20.2 times less return on investment than SOLENO THERAPEUT. But when comparing it to its historical volatility, Apple Inc is 22.84 times less risky than SOLENO THERAPEUT. It trades about 0.06 of its potential returns per unit of risk. SOLENO THERAPEUT DL 001 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 526.00 in SOLENO THERAPEUT DL 001 on August 31, 2024 and sell it today you would earn a total of 4,442 from holding SOLENO THERAPEUT DL 001 or generate 844.49% 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. SOLENO THERAPEUT DL 001
Performance |
| Timeline |
| Apple Inc |
| SOLENO THERAPEUT |
Apple and SOLENO THERAPEUT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and SOLENO THERAPEUT
The main advantage of trading using opposite Apple and SOLENO THERAPEUT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, SOLENO THERAPEUT 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 SOLENO THERAPEUT will offset losses from the drop in SOLENO THERAPEUT's long position.The idea behind Apple Inc and SOLENO THERAPEUT DL 001 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.| SOLENO THERAPEUT vs. Apple Inc | SOLENO THERAPEUT vs. Apple Inc | SOLENO THERAPEUT vs. Apple Inc | SOLENO THERAPEUT vs. Apple Inc |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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