Correlation Between Apple and East Japan
Can any of the company-specific risk be diversified away by investing in both Apple and East Japan 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 East Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and East Japan Railway, you can compare the effects of market volatilities on Apple and East Japan 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 East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and East Japan.
Diversification Opportunities for Apple and East Japan
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Apple and East is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of Apple i.e., Apple and East Japan go up and down completely randomly.
Pair Corralation between Apple and East Japan
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.83 times more return on investment than East Japan. However, Apple Inc is 1.21 times less risky than East Japan. It trades about 0.1 of its potential returns per unit of risk. East Japan Railway is currently generating about 0.0 per unit of risk. If you would invest 12,207 in Apple Inc on September 23, 2024 and sell it today you would earn a total of 12,013 from holding Apple Inc or generate 98.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Apple Inc vs. East Japan Railway
Performance |
Timeline |
Apple Inc |
East Japan Railway |
Apple and East Japan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apple and East Japan
The main advantage of trading using opposite Apple and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, East Japan 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 East Japan will offset losses from the drop in East Japan's long position.Apple vs. TRAVEL LEISURE DL 01 | Apple vs. Playtech plc | Apple vs. Platinum Investment Management | Apple vs. Playa Hotels Resorts |
East Japan vs. Union Pacific | East Japan vs. Canadian National Railway | East Japan vs. CSX Corporation | East Japan vs. MTR Limited |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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