Correlation Between Apple and Doman Building

Can any of the company-specific risk be diversified away by investing in both Apple and Doman Building 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 Doman Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc CDR and Doman Building Materials, you can compare the effects of market volatilities on Apple and Doman Building 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 Doman Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Doman Building.

Diversification Opportunities for Apple and Doman Building

0.65

Correlation Coefficient

Apple  Doman Building

Poor diversification

The 3 months correlation between Apple and Doman is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials 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 CDR are associated (or correlated) with Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of Apple i.e., Apple and Doman Building go up and down completely randomly.

Pair Corralation between Apple and Doman Building

Assuming the 90 days trading horizon Apple is expected to generate 1.19 times less return on investment than Doman Building. But when comparing it to its historical volatility, Apple Inc CDR is 1.61 times less risky than Doman Building. It trades about 0.15 of its potential returns per unit of risk. Doman Building Materials is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  894.00  in Doman Building Materials on September 12, 2024 and sell it today you would earn a total of  59.00  from holding Doman Building Materials or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Apple Inc CDR  vs.  Doman Building Materials

Apple Inc CDR

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Doman Building Materials

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Doman Building Materials are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Doman Building displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Doman Building

The main advantage of trading using opposite Apple and Doman Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Doman Building 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 Doman Building will offset losses from the drop in Doman Building's long position.

The idea behind Apple Inc CDR and Doman Building Materials 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.