Correlation Between Apple and Yokohama Rubber

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

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

Diversification Opportunities for Apple and Yokohama Rubber

-0.15

Correlation Coefficient

Apple  Yokohama Rubber

Good diversification

The 3 months correlation between Apple and Yokohama is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Apple i.e., Apple and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Apple and Yokohama Rubber

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.92 times more return on investment than Yokohama Rubber. However, Apple Inc is 1.09 times less risky than Yokohama Rubber. It trades about 0.23 of its potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.02 per unit of risk. If you would invest  19,345  in Apple Inc on September 14, 2024 and sell it today you would earn a total of  4,270  from holding Apple Inc or generate 22.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Apple Inc  vs.  The Yokohama Rubber

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) 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.

Yokohama Rubber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Apple and Yokohama Rubber

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

The idea behind Apple Inc and The Yokohama Rubber 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.