Correlation Between IncomeShares SP500 and IncomeShares Apple

Can any of the company-specific risk be diversified away by investing in both IncomeShares SP500 and IncomeShares Apple 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 IncomeShares SP500 and IncomeShares Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IncomeShares SP500 Options and IncomeShares Apple Options, you can compare the effects of market volatilities on IncomeShares SP500 and IncomeShares Apple 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 IncomeShares SP500 with a short position of IncomeShares Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of IncomeShares SP500 and IncomeShares Apple.

Diversification Opportunities for IncomeShares SP500 and IncomeShares Apple

-0.18

Correlation Coefficient

IncomeShares SP500  IncomeShares Apple

Good diversification

The 3 months correlation between IncomeShares and IncomeShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding IncomeShares SP500 Options and IncomeShares Apple Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Apple and IncomeShares SP500 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 IncomeShares SP500 Options are associated (or correlated) with IncomeShares Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Apple has no effect on the direction of IncomeShares SP500 i.e., IncomeShares SP500 and IncomeShares Apple go up and down completely randomly.

Pair Corralation between IncomeShares SP500 and IncomeShares Apple

Assuming the 90 days trading horizon IncomeShares SP500 Options is expected to generate 0.41 times more return on investment than IncomeShares Apple. However, IncomeShares SP500 Options is 2.45 times less risky than IncomeShares Apple. It trades about 0.11 of its potential returns per unit of risk. IncomeShares Apple Options is currently generating about -0.45 per unit of risk. If you would invest  861.00  in IncomeShares SP500 Options on October 25, 2024 and sell it today you would earn a total of  11.00  from holding IncomeShares SP500 Options or generate 1.28% return on investment over 90 days.

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

IncomeShares SP500 Options  vs.  IncomeShares Apple Options

IncomeShares SP500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares SP500 Options are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IncomeShares SP500 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IncomeShares Apple

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares Apple Options has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IncomeShares Apple is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IncomeShares SP500 and IncomeShares Apple

The main advantage of trading using opposite IncomeShares SP500 and IncomeShares Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IncomeShares SP500 position performs unexpectedly, IncomeShares Apple 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 IncomeShares Apple will offset losses from the drop in IncomeShares Apple's long position.

The idea behind IncomeShares SP500 Options and IncomeShares Apple Options 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .