Correlation Between Apple and Nissan Chemical

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

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

Diversification Opportunities for Apple and Nissan Chemical

0.4

Correlation Coefficient

Apple  Nissan Chemical

Very weak diversification

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

Pair Corralation between Apple and Nissan Chemical

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.14 times more return on investment than Nissan Chemical. However, Apple is 1.14 times more volatile than Nissan Chemical Corp. It trades about 0.23 of its potential returns per unit of risk. Nissan Chemical Corp is currently generating about 0.04 per unit of risk. If you would invest  19,345  in Apple Inc on September 14, 2024 and sell it today you would earn a total of  4,300  from holding Apple Inc or generate 22.23% return on investment over 90 days.

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

Apple Inc  vs.  Nissan Chemical Corp

Apple Inc

Risk-Adjusted Performance

18 of 100

Good

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 fragile fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nissan Chemical Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nissan Chemical Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nissan Chemical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Nissan Chemical

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

The idea behind Apple Inc and Nissan Chemical 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.