Correlation Between Apple and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Apple and Trane Technologies 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 Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Trane Technologies plc, you can compare the effects of market volatilities on Apple and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Trane Technologies.
Diversification Opportunities for Apple and Trane Technologies
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Trane is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Apple i.e., Apple and Trane Technologies go up and down completely randomly.
Pair Corralation between Apple and Trane Technologies
Assuming the 90 days trading horizon Apple is expected to generate 1.18 times less return on investment than Trane Technologies. But when comparing it to its historical volatility, Apple Inc is 2.83 times less risky than Trane Technologies. It trades about 0.31 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 96,622 in Trane Technologies plc on October 7, 2024 and sell it today you would earn a total of 18,578 from holding Trane Technologies plc or generate 19.23% 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. Trane Technologies plc
Performance |
Timeline |
Apple Inc |
Trane Technologies plc |
Apple and Trane Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apple and Trane Technologies
The main advantage of trading using opposite Apple and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.Apple vs. METISA Metalrgica Timboense | Apple vs. Metalrgica Riosulense SA | Apple vs. Tres Tentos Agroindustrial | Apple vs. Metalurgica Gerdau SA |
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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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