Correlation Between Apple and Waste Management
Can any of the company-specific risk be diversified away by investing in both Apple and Waste Management 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 Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Waste Management, you can compare the effects of market volatilities on Apple and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Waste Management.
Diversification Opportunities for Apple and Waste Management
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Waste is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Apple i.e., Apple and Waste Management go up and down completely randomly.
Pair Corralation between Apple and Waste Management
Assuming the 90 days trading horizon Apple is expected to generate 6.67 times less return on investment than Waste Management. But when comparing it to its historical volatility, Apple Inc is 1.28 times less risky than Waste Management. It trades about 0.06 of its potential returns per unit of risk. Waste Management is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 19,232 in Waste Management on August 28, 2024 and sell it today you would earn a total of 2,203 from holding Waste Management or generate 11.45% 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. Waste Management
Performance |
| Timeline |
| Apple Inc |
| Waste Management |
Apple and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Waste Management
The main advantage of trading using opposite Apple and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| Apple vs. Summit Materials | Apple vs. Lion One Metals | Apple vs. SANOK RUBBER ZY | Apple vs. Goodyear Tire Rubber |
| Waste Management vs. PLAYTIKA HOLDING DL 01 | Waste Management vs. HEALTHCARE REAL A | Waste Management vs. Natural Health Trends | Waste Management vs. Universal Display |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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