Correlation Between International Business and Apple
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Apple Inc, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Apple.
Diversification Opportunities for International Business and Apple
0.22 | Correlation Coefficient |
Modest diversification
The 1 month correlation between International and Apple is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and International Business 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 International Business Machines 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 International Business i.e., International Business and Apple go up and down completely randomly.
Pair Corralation between International Business and Apple
Considering the 90-day investment horizon International Business Machines is expected to under-perform the Apple. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.85 times less risky than Apple. The stock trades about -0.27 of its potential returns per unit of risk. The Apple Inc is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 17,608 in Apple Inc on January 19, 2024 and sell it today you would lose (803.00) from holding Apple Inc or give up 4.56% of portfolio value over 90 days.
| Time Period | 1 Month [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Apple Inc
Performance |
| Timeline |
| International Business |
| Apple Inc |
International Business and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Apple
The main advantage of trading using opposite International Business and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.| International Business vs. Pfizer Inc | International Business vs. Home Federal Bancorp | International Business vs. Betterware De Mexico | International Business vs. Heartland Financial USA |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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