Correlation Between Apple and Yellow Cake
Can any of the company-specific risk be diversified away by investing in both Apple and Yellow Cake 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 Yellow Cake into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Yellow Cake plc, you can compare the effects of market volatilities on Apple and Yellow Cake 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 Yellow Cake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Yellow Cake.
Diversification Opportunities for Apple and Yellow Cake
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Apple and Yellow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Yellow Cake plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yellow Cake plc 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 Yellow Cake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yellow Cake plc has no effect on the direction of Apple i.e., Apple and Yellow Cake go up and down completely randomly.
Pair Corralation between Apple and Yellow Cake
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.44 times more return on investment than Yellow Cake. However, Apple Inc is 2.28 times less risky than Yellow Cake. It trades about 0.2 of its potential returns per unit of risk. Yellow Cake plc is currently generating about 0.03 per unit of risk. If you would invest 15,784 in Apple Inc on February 4, 2024 and sell it today you would earn a total of 1,424 from holding Apple Inc or generate 9.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Apple Inc vs. Yellow Cake plc
Performance |
Timeline |
Apple Inc |
Yellow Cake plc |
Apple and Yellow Cake Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apple and Yellow Cake
The main advantage of trading using opposite Apple and Yellow Cake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Yellow Cake 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 Yellow Cake will offset losses from the drop in Yellow Cake's long position.Apple vs. Grand Canyon Education | Apple vs. TAL Education Group | Apple vs. National Retail Properties | Apple vs. FAST RETAIL ADR |
Yellow Cake vs. Apple Inc | Yellow Cake vs. Apple Inc | Yellow Cake vs. Apple Inc | Yellow Cake vs. Apple Inc |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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