Correlation Between Apple and PVH Corp
Can any of the company-specific risk be diversified away by investing in both Apple and PVH Corp 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 PVH Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and PVH Corp, you can compare the effects of market volatilities on Apple and PVH Corp 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 PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and PVH Corp.
Diversification Opportunities for Apple and PVH Corp
Poor diversification
The 3 months correlation between Apple and PVH is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Apple i.e., Apple and PVH Corp go up and down completely randomly.
Pair Corralation between Apple and PVH Corp
Assuming the 90 days trading horizon Apple Inc is expected to under-perform the PVH Corp. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.1 times less risky than PVH Corp. The stock trades about -0.47 of its potential returns per unit of risk. The PVH Corp is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest 10,330 in PVH Corp on October 29, 2024 and sell it today you would lose (1,110) from holding PVH Corp or give up 10.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. PVH Corp
Performance |
| Timeline |
| Apple Inc |
| PVH Corp |
Apple and PVH Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and PVH Corp
The main advantage of trading using opposite Apple and PVH Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, PVH Corp 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 PVH Corp will offset losses from the drop in PVH Corp's long position.| Apple vs. Grupo Carso SAB | Apple vs. CARSALESCOM | Apple vs. Commercial Vehicle Group | Apple vs. DELTA AIR LINES |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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