Correlation Between Japan Asia and Apple

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

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

Diversification Opportunities for Japan Asia and Apple

0.15

Correlation Coefficient

Japan Asia  Apple

Average diversification

The 3 months correlation between Japan and Apple is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Japan Asia 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 Japan Asia Investment are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Japan Asia i.e., Japan Asia and Apple go up and down completely randomly.

Pair Corralation between Japan Asia and Apple

Assuming the 90 days horizon Japan Asia Investment is expected to under-perform the Apple. In addition to that, Japan Asia is 1.28 times more volatile than Apple Inc. It trades about -0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.26 per unit of volatility. If you would invest  19,403  in Apple Inc on September 15, 2024 and sell it today you would earn a total of  4,207  from holding Apple Inc or generate 21.68% return on investment over 90 days.

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

Japan Asia Investment  vs.  Apple Inc

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Asia and Apple

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

The idea behind Japan Asia Investment and Apple Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.