Correlation Between Apple and BUNZL PLC
Can any of the company-specific risk be diversified away by investing in both Apple and BUNZL PLC 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 BUNZL PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and BUNZL PLC ADR, you can compare the effects of market volatilities on Apple and BUNZL PLC 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 BUNZL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and BUNZL PLC.
Diversification Opportunities for Apple and BUNZL PLC
Modest diversification
The 3 months correlation between Apple and BUNZL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and BUNZL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BUNZL PLC ADR 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 BUNZL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BUNZL PLC ADR has no effect on the direction of Apple i.e., Apple and BUNZL PLC go up and down completely randomly.
Pair Corralation between Apple and BUNZL PLC
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.45 times more return on investment than BUNZL PLC. However, Apple Inc is 2.23 times less risky than BUNZL PLC. It trades about 0.66 of its potential returns per unit of risk. BUNZL PLC ADR is currently generating about -0.19 per unit of risk. If you would invest 22,085 in Apple Inc on September 25, 2024 and sell it today you would earn a total of 2,415 from holding Apple Inc or generate 10.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Apple Inc vs. BUNZL PLC ADR
Performance |
Timeline |
Apple Inc |
BUNZL PLC ADR |
Apple and BUNZL PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apple and BUNZL PLC
The main advantage of trading using opposite Apple and BUNZL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, BUNZL PLC 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 BUNZL PLC will offset losses from the drop in BUNZL PLC's long position.The idea behind Apple Inc and BUNZL PLC ADR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |