Correlation Between Apple and DNB BANK

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

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

Diversification Opportunities for Apple and DNB BANK

0.63

Correlation Coefficient

Apple  DNB BANK

Poor diversification

The 3 months correlation between Apple and DNB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA 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 DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of Apple i.e., Apple and DNB BANK go up and down completely randomly.

Pair Corralation between Apple and DNB BANK

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.52 times more return on investment than DNB BANK. However, Apple Inc is 1.91 times less risky than DNB BANK. It trades about 0.25 of its potential returns per unit of risk. DNB BANK ASA is currently generating about 0.03 per unit of risk. If you would invest  20,351  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  3,869  from holding Apple Inc or generate 19.01% return on investment over 90 days.

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

Apple Inc  vs.  DNB BANK ASA

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

DNB BANK ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DNB BANK ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DNB BANK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and DNB BANK

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

The idea behind Apple Inc and DNB BANK ASA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.