Correlation Between Apple and Nippon Light

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

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

Diversification Opportunities for Apple and Nippon Light

-0.24

Correlation Coefficient

Apple  Nippon Light

Very good diversification

The 3 months correlation between Apple and Nippon is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal 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 Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of Apple i.e., Apple and Nippon Light go up and down completely randomly.

Pair Corralation between Apple and Nippon Light

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.72 times more return on investment than Nippon Light. However, Apple Inc is 1.39 times less risky than Nippon Light. It trades about 0.07 of its potential returns per unit of risk. Nippon Light Metal is currently generating about -0.02 per unit of risk. If you would invest  21,325  in Apple Inc on October 23, 2024 and sell it today you would earn a total of  985.00  from holding Apple Inc or generate 4.62% 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.  Nippon Light Metal

Apple Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Apple is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Nippon Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nippon Light is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and Nippon Light

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

The idea behind Apple Inc and Nippon Light Metal 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.