Correlation Between Apple and Zhejiang Expressway

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

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

Diversification Opportunities for Apple and Zhejiang Expressway

0.13

Correlation Coefficient

Apple  Zhejiang Expressway

Average diversification

The 3 months correlation between Apple and Zhejiang is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Zhejiang Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Expressway 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 Zhejiang Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Expressway has no effect on the direction of Apple i.e., Apple and Zhejiang Expressway go up and down completely randomly.

Pair Corralation between Apple and Zhejiang Expressway

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.67 times more return on investment than Zhejiang Expressway. However, Apple Inc is 1.5 times less risky than Zhejiang Expressway. It trades about 0.48 of its potential returns per unit of risk. Zhejiang Expressway Co is currently generating about 0.24 per unit of risk. If you would invest  22,135  in Apple Inc on September 24, 2024 and sell it today you would earn a total of  2,015  from holding Apple Inc or generate 9.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Zhejiang Expressway Co

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Expressway

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Expressway Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zhejiang Expressway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Zhejiang Expressway

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

The idea behind Apple Inc and Zhejiang Expressway Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.