Correlation Between Apple and JPM INDIAN

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

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

Diversification Opportunities for Apple and JPM INDIAN

0.73

Correlation Coefficient

Apple  JPM INDIAN

Poor diversification

The 3 months correlation between Apple and JPM is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and JPM INDIAN INVT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM INDIAN INVT 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 JPM INDIAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM INDIAN INVT has no effect on the direction of Apple i.e., Apple and JPM INDIAN go up and down completely randomly.

Pair Corralation between Apple and JPM INDIAN

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.13 times more return on investment than JPM INDIAN. However, Apple is 1.13 times more volatile than JPM INDIAN INVT. It trades about 0.11 of its potential returns per unit of risk. JPM INDIAN INVT is currently generating about 0.05 per unit of risk. If you would invest  20,415  in Apple Inc on September 30, 2024 and sell it today you would earn a total of  4,100  from holding Apple Inc or generate 20.08% 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.  JPM INDIAN INVT

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

JPM INDIAN INVT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JPM INDIAN INVT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, JPM INDIAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and JPM INDIAN

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

The idea behind Apple Inc and JPM INDIAN INVT 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.