Correlation Between Apple and Johnson Electric

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

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

Diversification Opportunities for Apple and Johnson Electric

0.5

Correlation Coefficient

Apple  Johnson Electric

Very weak diversification

The 3 months correlation between Apple and Johnson is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Johnson Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Electric Holdings 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 Johnson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Electric Holdings has no effect on the direction of Apple i.e., Apple and Johnson Electric go up and down completely randomly.

Pair Corralation between Apple and Johnson Electric

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Johnson Electric. In addition to that, Apple is 1.33 times more volatile than Johnson Electric Holdings. It trades about -0.42 of its total potential returns per unit of risk. Johnson Electric Holdings is currently generating about -0.09 per unit of volatility. If you would invest  133.00  in Johnson Electric Holdings on October 22, 2024 and sell it today you would lose (2.00) from holding Johnson Electric Holdings or give up 1.5% of portfolio value over 90 days.

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

Apple Inc  vs.  Johnson Electric Holdings

Apple Inc

Risk-Adjusted Performance

2 of 100

Insignificant

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

Johnson Electric Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Electric Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Johnson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Johnson Electric

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

The idea behind Apple Inc and Johnson Electric Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.