Correlation Between North American and Apple
Can any of the company-specific risk be diversified away by investing in both North American and Apple 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 North American and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Apple Inc CDR, you can compare the effects of market volatilities on North American and Apple 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 North American with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Apple.
Diversification Opportunities for North American and Apple
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between North and Apple is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR and North American 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 North American Construction are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc CDR has no effect on the direction of North American i.e., North American and Apple go up and down completely randomly.
Pair Corralation between North American and Apple
Assuming the 90 days trading horizon North American is expected to generate 1.38 times less return on investment than Apple. In addition to that, North American is 2.12 times more volatile than Apple Inc CDR. It trades about 0.21 of its total potential returns per unit of risk. Apple Inc CDR is currently generating about 0.61 per unit of volatility. If you would invest 3,299 in Apple Inc CDR on September 14, 2024 and sell it today you would earn a total of 336.00 from holding Apple Inc CDR or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Apple Inc CDR
Performance |
| Timeline |
| North American Const |
| Apple Inc CDR |
North American and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Apple
The main advantage of trading using opposite North American and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
| Apple vs. A W FOOD | Apple vs. Canadian Utilities Limited | Apple vs. North American Construction | Apple vs. First National Financial |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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