Correlation Between Apple and DAWSON GEOPHYSICAL

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

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

Diversification Opportunities for Apple and DAWSON GEOPHYSICAL

0.85

Correlation Coefficient

Apple  DAWSON GEOPHYSICAL

Very poor diversification

The 3 months correlation between Apple and DAWSON is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and DAWSON GEOPHYSICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAWSON GEOPHYSICAL 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 DAWSON GEOPHYSICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAWSON GEOPHYSICAL has no effect on the direction of Apple i.e., Apple and DAWSON GEOPHYSICAL go up and down completely randomly.

Pair Corralation between Apple and DAWSON GEOPHYSICAL

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.62 times more return on investment than DAWSON GEOPHYSICAL. However, Apple Inc is 1.6 times less risky than DAWSON GEOPHYSICAL. It trades about 0.27 of its potential returns per unit of risk. DAWSON GEOPHYSICAL is currently generating about 0.15 per unit of risk. If you would invest  19,427  in Apple Inc on September 14, 2024 and sell it today you would earn a total of  4,263  from holding Apple Inc or generate 21.94% return on investment over 90 days.

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

Apple Inc  vs.  DAWSON GEOPHYSICAL

Apple Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

DAWSON GEOPHYSICAL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DAWSON GEOPHYSICAL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DAWSON GEOPHYSICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and DAWSON GEOPHYSICAL

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

The idea behind Apple Inc and DAWSON GEOPHYSICAL 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.