Correlation Between Apple and Incitec Pivot

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

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

Diversification Opportunities for Apple and Incitec Pivot

-0.46

Correlation Coefficient

Apple  Incitec Pivot

Very good diversification

The 3 months correlation between Apple and Incitec is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot 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 Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of Apple i.e., Apple and Incitec Pivot go up and down completely randomly.

Pair Corralation between Apple and Incitec Pivot

Given the investment horizon of 90 days Apple is expected to generate 48.76 times less return on investment than Incitec Pivot. But when comparing it to its historical volatility, Apple Inc is 2.64 times less risky than Incitec Pivot. It trades about 0.01 of its potential returns per unit of risk. Incitec Pivot Ltd is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Incitec Pivot Ltd on October 6, 2024 and sell it today you would earn a total of  25.00  from holding Incitec Pivot Ltd or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Incitec Pivot Ltd

Apple Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Incitec Pivot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Incitec Pivot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Incitec Pivot

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

The idea behind Apple Inc and Incitec Pivot Ltd 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.