Correlation Between Apple and Anhui Expressway

Can any of the company-specific risk be diversified away by investing in both Apple and Anhui 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 Anhui 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 Anhui Expressway, you can compare the effects of market volatilities on Apple and Anhui 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 Anhui Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Anhui Expressway.

Diversification Opportunities for Apple and Anhui Expressway

0.68

Correlation Coefficient

Apple  Anhui Expressway

Poor diversification

The 3 months correlation between Apple and Anhui is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Anhui Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui 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 Anhui Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Expressway has no effect on the direction of Apple i.e., Apple and Anhui Expressway go up and down completely randomly.

Pair Corralation between Apple and Anhui Expressway

Assuming the 90 days trading horizon Apple is expected to generate 98.74 times less return on investment than Anhui Expressway. But when comparing it to its historical volatility, Apple Inc is 3.08 times less risky than Anhui Expressway. It trades about 0.01 of its potential returns per unit of risk. Anhui Expressway is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Anhui Expressway on October 10, 2024 and sell it today you would earn a total of  8.00  from holding Anhui Expressway or generate 6.78% return on investment over 90 days.

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

Apple Inc  vs.  Anhui Expressway

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 very uncertain fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Anhui Expressway

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Expressway are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Anhui Expressway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Anhui Expressway

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

The idea behind Apple Inc and Anhui Expressway 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.