Correlation Between Apple and Fresenius Medical

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

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

Diversification Opportunities for Apple and Fresenius Medical

0.87

Correlation Coefficient

Apple  Fresenius Medical

Very poor diversification

The 3 months correlation between Apple and Fresenius is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Apple i.e., Apple and Fresenius Medical go up and down completely randomly.

Pair Corralation between Apple and Fresenius Medical

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.67 times more return on investment than Fresenius Medical. However, Apple Inc is 1.5 times less risky than Fresenius Medical. It trades about 0.26 of its potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.17 per unit of risk. If you would invest  19,427  in Apple Inc on September 16, 2024 and sell it today you would earn a total of  4,208  from holding Apple Inc or generate 21.66% return on investment over 90 days.

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

Apple Inc  vs.  Fresenius Medical Care

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fresenius Medical Care

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Fresenius Medical

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

The idea behind Apple Inc and Fresenius Medical Care 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.