Correlation Between Apple and Koninklijke Philips
Can any of the company-specific risk be diversified away by investing in both Apple and Koninklijke Philips 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 Koninklijke Philips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Koninklijke Philips NV, you can compare the effects of market volatilities on Apple and Koninklijke Philips 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 Koninklijke Philips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Koninklijke Philips.
Diversification Opportunities for Apple and Koninklijke Philips
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Apple and Koninklijke is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Apple i.e., Apple and Koninklijke Philips go up and down completely randomly.
Pair Corralation between Apple and Koninklijke Philips
Given the investment horizon of 90 days Apple Inc is expected to under-perform the Koninklijke Philips. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.02 times less risky than Koninklijke Philips. The stock trades about -0.03 of its potential returns per unit of risk. The Koninklijke Philips NV is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,989 in Koninklijke Philips NV on January 25, 2024 and sell it today you would earn a total of 108.00 from holding Koninklijke Philips NV or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Koninklijke Philips NV
Performance |
| Timeline |
| Apple Inc |
| Koninklijke Philips |
Apple and Koninklijke Philips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Koninklijke Philips
The main advantage of trading using opposite Apple and Koninklijke Philips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Koninklijke Philips 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 Koninklijke Philips will offset losses from the drop in Koninklijke Philips' long position.The idea behind Apple Inc and Koninklijke Philips NV 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.| Koninklijke Philips vs. CONMED | Koninklijke Philips vs. LivaNova PLC | Koninklijke Philips vs. iRhythm Technologies | Koninklijke Philips vs. PulmonxCorp |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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