Correlation Between Apple and INMED PHARMACEUTICALS

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

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

Diversification Opportunities for Apple and INMED PHARMACEUTICALS

0.4

Correlation Coefficient

Apple  INMED PHARMACEUTICALS

Very weak diversification

The 3 months correlation between Apple and INMED is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and INMED PHARMACEUTICALS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INMED PHARMACEUTICALS INC 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 INMED PHARMACEUTICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INMED PHARMACEUTICALS INC has no effect on the direction of Apple i.e., Apple and INMED PHARMACEUTICALS go up and down completely randomly.

Pair Corralation between Apple and INMED PHARMACEUTICALS

Assuming the 90 days trading horizon Apple is expected to generate 2.16 times less return on investment than INMED PHARMACEUTICALS. But when comparing it to its historical volatility, Apple Inc is 12.13 times less risky than INMED PHARMACEUTICALS. It trades about 0.11 of its potential returns per unit of risk. INMED PHARMACEUTICALS INC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,590  in INMED PHARMACEUTICALS INC on September 26, 2024 and sell it today you would lose (3,196) from holding INMED PHARMACEUTICALS INC or give up 89.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Apple Inc  vs.  INMED PHARMACEUTICALS INC

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

INMED PHARMACEUTICALS INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INMED PHARMACEUTICALS INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, INMED PHARMACEUTICALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and INMED PHARMACEUTICALS

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

The idea behind Apple Inc and INMED PHARMACEUTICALS INC 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.