Correlation Between Apple and China Resources

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

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

Diversification Opportunities for Apple and China Resources

-0.34

Correlation Coefficient

Apple  China Resources

Very good diversification

The 3 months correlation between Apple and China is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of Apple i.e., Apple and China Resources go up and down completely randomly.

Pair Corralation between Apple and China Resources

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.35 times more return on investment than China Resources. However, Apple Inc is 2.82 times less risky than China Resources. It trades about 0.48 of its potential returns per unit of risk. China Resources Land is currently generating about 0.0 per unit of risk. If you would invest  21,850  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  1,910  from holding Apple Inc or generate 8.74% return on investment over 90 days.

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

Apple Inc  vs.  China Resources Land

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

China Resources Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and China Resources

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

The idea behind Apple Inc and China Resources Land 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.