Correlation Between Target and Apple
Can any of the company-specific risk be diversified away by investing in both Target 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 Target and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Apple Inc, you can compare the effects of market volatilities on Target 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 Target with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Apple.
Diversification Opportunities for Target and Apple
Pay attention - limited upside
The 3 months correlation between Target and Apple is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Target and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Target 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 Target 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 Target i.e., Target and Apple go up and down completely randomly.
Pair Corralation between Target and Apple
Considering the 90-day investment horizon Target is expected to generate 0.74 times more return on investment than Apple. However, Target is 1.35 times less risky than Apple. It trades about -0.08 of its potential returns per unit of risk. Apple Inc is currently generating about -0.19 per unit of risk. If you would invest 17,046 in Target on January 20, 2024 and sell it today you would lose (388.00) from holding Target or give up 2.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target vs. Apple Inc
Performance |
| Timeline |
| Target |
| Apple Inc |
Target and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target and Apple
The main advantage of trading using opposite Target and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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.| Target vs. Aquagold International | Target vs. Morningstar Unconstrained Allocation | Target vs. Thrivent High Yield | Target vs. Via Renewables |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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