Correlation Between Apple and TDK

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

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

Diversification Opportunities for Apple and TDK

0.57

Correlation Coefficient

Apple  TDK

Very weak diversification

The 3 months correlation between Apple and TDK is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and TDK Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDK Corporation 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 TDK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDK Corporation has no effect on the direction of Apple i.e., Apple and TDK go up and down completely randomly.

Pair Corralation between Apple and TDK

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.54 times more return on investment than TDK. However, Apple Inc is 1.86 times less risky than TDK. It trades about 0.22 of its potential returns per unit of risk. TDK Corporation is currently generating about 0.11 per unit of risk. If you would invest  19,413  in Apple Inc on September 17, 2024 and sell it today you would earn a total of  4,202  from holding Apple Inc or generate 21.65% 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.  TDK Corp.

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) 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.

TDK Corporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TDK Corporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TDK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and TDK

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

The idea behind Apple Inc and TDK Corporation 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.