Correlation Between Apple and Nitto Denko

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

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

Diversification Opportunities for Apple and Nitto Denko

-0.32

Correlation Coefficient

Apple  Nitto Denko

Very good diversification

The 3 months correlation between Apple and Nitto is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Nitto Denko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko Corp 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 Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko Corp has no effect on the direction of Apple i.e., Apple and Nitto Denko go up and down completely randomly.

Pair Corralation between Apple and Nitto Denko

Assuming the 90 days trading horizon Apple is expected to generate 2.73 times less return on investment than Nitto Denko. But when comparing it to its historical volatility, Apple Inc is 1.55 times less risky than Nitto Denko. It trades about 0.11 of its potential returns per unit of risk. Nitto Denko Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,690  in Nitto Denko Corp on December 5, 2024 and sell it today you would earn a total of  140.00  from holding Nitto Denko Corp or generate 8.28% return on investment over 90 days.

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

Apple Inc  vs.  Nitto Denko Corp

Apple Inc

Risk-Adjusted Performance

Very Weak

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 stable fundamental indicators, Apple is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Nitto Denko Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nitto Denko Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Nitto Denko unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Nitto Denko

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

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