Correlation Between Apple and NZ REFINING
Can any of the company-specific risk be diversified away by investing in both Apple and NZ REFINING 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 NZ REFINING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and NZ REFINING CO, you can compare the effects of market volatilities on Apple and NZ REFINING 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 NZ REFINING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and NZ REFINING.
Diversification Opportunities for Apple and NZ REFINING
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Apple and NZR is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and NZ REFINING CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NZ REFINING CO 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 NZ REFINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NZ REFINING CO has no effect on the direction of Apple i.e., Apple and NZ REFINING go up and down completely randomly.
Pair Corralation between Apple and NZ REFINING
Assuming the 90 days trading horizon Apple is expected to generate 1.57 times less return on investment than NZ REFINING. But when comparing it to its historical volatility, Apple Inc is 1.13 times less risky than NZ REFINING. It trades about 0.03 of its potential returns per unit of risk. NZ REFINING CO is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 77.00 in NZ REFINING CO on February 22, 2024 and sell it today you would earn a total of 11.00 from holding NZ REFINING CO or generate 14.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Apple Inc vs. NZ REFINING CO
Performance |
Timeline |
Apple Inc |
NZ REFINING CO |
Apple and NZ REFINING Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Apple and NZ REFINING
The main advantage of trading using opposite Apple and NZ REFINING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, NZ REFINING 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 NZ REFINING will offset losses from the drop in NZ REFINING's long position.The idea behind Apple Inc and NZ REFINING CO 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.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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