Correlation Between Apple and CHINA STATE

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

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

Diversification Opportunities for Apple and CHINA STATE

-0.09

Correlation Coefficient

Apple  CHINA STATE

Good diversification

The 3 months correlation between Apple and CHINA is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CHINA STATE STRU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA STATE STRU 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 CHINA STATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA STATE STRU has no effect on the direction of Apple i.e., Apple and CHINA STATE go up and down completely randomly.

Pair Corralation between Apple and CHINA STATE

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.7 times more return on investment than CHINA STATE. However, Apple is 1.7 times more volatile than CHINA STATE STRU. It trades about 0.48 of its potential returns per unit of risk. CHINA STATE STRU is currently generating about -0.22 per unit of risk. If you would invest  21,850  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  1,910  from holding Apple Inc or generate 8.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Apple Inc  vs.  CHINA STATE STRU

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHINA STATE STRU

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA STATE STRU are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CHINA STATE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and CHINA STATE

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

The idea behind Apple Inc and CHINA STATE STRU 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .