Correlation Between Apple and CHINA EDUCATION
Can any of the company-specific risk be diversified away by investing in both Apple and CHINA EDUCATION 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 CHINA EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and CHINA EDUCATION GROUP, you can compare the effects of market volatilities on Apple and CHINA EDUCATION 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 CHINA EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and CHINA EDUCATION.
Diversification Opportunities for Apple and CHINA EDUCATION
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Apple and CHINA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP 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 CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of Apple i.e., Apple and CHINA EDUCATION go up and down completely randomly.
Pair Corralation between Apple and CHINA EDUCATION
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.21 times more return on investment than CHINA EDUCATION. However, Apple Inc is 4.72 times less risky than CHINA EDUCATION. It trades about 0.46 of its potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about -0.23 per unit of risk. If you would invest 20,341 in Apple Inc on September 1, 2024 and sell it today you would earn a total of 2,109 from holding Apple Inc or generate 10.37% 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. CHINA EDUCATION GROUP
Performance |
| Timeline |
| Apple Inc |
| CHINA EDUCATION GROUP |
Apple and CHINA EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and CHINA EDUCATION
The main advantage of trading using opposite Apple and CHINA EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, CHINA EDUCATION 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 CHINA EDUCATION will offset losses from the drop in CHINA EDUCATION's long position.The idea behind Apple Inc and CHINA EDUCATION GROUP 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.| CHINA EDUCATION vs. DALATA HOTEL | CHINA EDUCATION vs. Choice Hotels International | CHINA EDUCATION vs. Soken Chemical Engineering | CHINA EDUCATION vs. Host Hotels Resorts |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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