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

0.63

Correlation Coefficient

Apple  TDK

Poor diversification

The 3 months correlation between Apple and TDK is 0.63. 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 under-perform the TDK. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.04 times less risky than TDK. The stock trades about -0.47 of its potential returns per unit of risk. The TDK Corporation is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,247  in TDK Corporation on October 26, 2024 and sell it today you would lose (85.00) from holding TDK Corporation or give up 6.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Apple Inc  vs.  TDK Corp.

Apple Inc

Risk-Adjusted Performance

0 of 100

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

TDK Corporation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TDK Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, TDK is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.