Correlation Between Apple and RONN

Can any of the company-specific risk be diversified away by investing in both Apple and RONN 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 RONN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and RONN Inc, you can compare the effects of market volatilities on Apple and RONN 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 RONN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and RONN.

Diversification Opportunities for Apple and RONN

-0.35

Correlation Coefficient

Apple  RONN

Very good diversification

The 3 months correlation between Apple and RONN is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and RONN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RONN Inc 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 RONN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RONN Inc has no effect on the direction of Apple i.e., Apple and RONN go up and down completely randomly.

Pair Corralation between Apple and RONN

Given the investment horizon of 90 days Apple is expected to generate 5.73 times less return on investment than RONN. But when comparing it to its historical volatility, Apple Inc is 22.1 times less risky than RONN. It trades about 0.16 of its potential returns per unit of risk. RONN Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.08  in RONN Inc on September 20, 2024 and sell it today you would lose (0.04) from holding RONN Inc or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  RONN Inc

Apple Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RONN Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RONN Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, RONN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and RONN

The main advantage of trading using opposite Apple and RONN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, RONN 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 RONN will offset losses from the drop in RONN's long position.

The idea behind Apple Inc and RONN Inc 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.