Correlation Between Apple and Northern Data

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

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

Diversification Opportunities for Apple and Northern Data

0.92

Correlation Coefficient

Apple  Northern Data

Almost no diversification

The 3 months correlation between Apple and Northern is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Northern Data AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Data AG 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 Northern Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Data AG has no effect on the direction of Apple i.e., Apple and Northern Data go up and down completely randomly.

Pair Corralation between Apple and Northern Data

Assuming the 90 days trading horizon Apple is expected to generate 6.08 times less return on investment than Northern Data. But when comparing it to its historical volatility, Apple Inc is 4.12 times less risky than Northern Data. It trades about 0.17 of its potential returns per unit of risk. Northern Data AG is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,555  in Northern Data AG on October 10, 2024 and sell it today you would earn a total of  2,425  from holding Northern Data AG or generate 94.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Apple Inc  vs.  Northern Data AG

Apple Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 13 (%) 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.

Northern Data AG

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Data AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Northern Data displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Northern Data

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

The idea behind Apple Inc and Northern Data AG 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.