Correlation Between Apple and Japan Post

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

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

Diversification Opportunities for Apple and Japan Post

-0.14

Correlation Coefficient

Apple  Japan Post

Good diversification

The 3 months correlation between Apple and Japan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Japan Post Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Insurance 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 Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Insurance has no effect on the direction of Apple i.e., Apple and Japan Post go up and down completely randomly.

Pair Corralation between Apple and Japan Post

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.0 times more return on investment than Japan Post. However, Apple Inc is 1.0 times less risky than Japan Post. It trades about 0.07 of its potential returns per unit of risk. Japan Post Insurance is currently generating about 0.05 per unit of risk. If you would invest  19,956  in Apple Inc on December 5, 2024 and sell it today you would earn a total of  2,754  from holding Apple Inc or generate 13.8% return on investment over 90 days.

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

Apple Inc  vs.  Japan Post Insurance

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Apple is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Japan Post Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Post Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Japan Post is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Japan Post

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

The idea behind Apple Inc and Japan Post Insurance 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.