Correlation Between Apple and New York
Can any of the company-specific risk be diversified away by investing in both Apple and New York 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 New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and New York Community, you can compare the effects of market volatilities on Apple and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and New York.
Diversification Opportunities for Apple and New York
Very poor diversification
The 3 months correlation between Apple and New is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and New York Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Community 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Community has no effect on the direction of Apple i.e., Apple and New York go up and down completely randomly.
Pair Corralation between Apple and New York
Assuming the 90 days trading horizon Apple is expected to generate 1.37 times less return on investment than New York. But when comparing it to its historical volatility, Apple Inc is 2.91 times less risky than New York. It trades about 0.23 of its potential returns per unit of risk. New York Community is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 985.00 in New York Community on September 5, 2024 and sell it today you would earn a total of 155.00 from holding New York Community or generate 15.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 97.67% |
Values | Daily Returns |
Apple Inc vs. New York Community
Performance |
Timeline |
Apple Inc |
New York Community |
Apple and New York Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apple and New York
The main advantage of trading using opposite Apple and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.Apple vs. ATRYS HEALTH SA | Apple vs. SHIP HEALTHCARE HLDGINC | Apple vs. Ramsay Health Care | Apple vs. The Hanover 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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