Correlation Between Apple and Yuexiu Transport

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

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

Diversification Opportunities for Apple and Yuexiu Transport

0.69

Correlation Coefficient

Apple  Yuexiu Transport

Poor diversification

The 3 months correlation between Apple and Yuexiu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf 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 Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of Apple i.e., Apple and Yuexiu Transport go up and down completely randomly.

Pair Corralation between Apple and Yuexiu Transport

Assuming the 90 days trading horizon Apple is expected to generate 2.78 times less return on investment than Yuexiu Transport. But when comparing it to its historical volatility, Apple Inc is 3.21 times less risky than Yuexiu Transport. It trades about 0.09 of its potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Yuexiu Transport Infrastructure on October 5, 2024 and sell it today you would earn a total of  33.00  from holding Yuexiu Transport Infrastructure or generate 220.0% 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.  Yuexiu Transport Infrastructur

Apple Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Yuexiu Transport Inf

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Yuexiu Transport Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Yuexiu Transport

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

The idea behind Apple Inc and Yuexiu Transport Infrastructure 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .