Correlation Between Apple and Koninklijke Philips

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

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

Diversification Opportunities for Apple and Koninklijke Philips

-0.39

Correlation Coefficient

Apple  Koninklijke Philips

Very good diversification

The 3 months correlation between Apple and Koninklijke is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Apple i.e., Apple and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Apple and Koninklijke Philips

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.53 times more return on investment than Koninklijke Philips. However, Apple Inc is 1.88 times less risky than Koninklijke Philips. It trades about 0.05 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about -0.11 per unit of risk. If you would invest  21,629  in Apple Inc on October 23, 2024 and sell it today you would earn a total of  691.00  from holding Apple Inc or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Apple Inc  vs.  Koninklijke Philips NV

Apple Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Apple is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Apple and Koninklijke Philips

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

The idea behind Apple Inc and Koninklijke Philips NV 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.