Correlation Between Apple and CHINA OIL

Can any of the company-specific risk be diversified away by investing in both Apple and CHINA OIL 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 OIL 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 OIL AND, you can compare the effects of market volatilities on Apple and CHINA OIL 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 OIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and CHINA OIL.

Diversification Opportunities for Apple and CHINA OIL

0.75

Correlation Coefficient

Apple  CHINA OIL

Poor diversification

The 3 months correlation between Apple and CHINA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CHINA OIL AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA OIL AND 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 OIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA OIL AND has no effect on the direction of Apple i.e., Apple and CHINA OIL go up and down completely randomly.

Pair Corralation between Apple and CHINA OIL

Assuming the 90 days trading horizon Apple Inc is expected to generate 2.19 times more return on investment than CHINA OIL. However, Apple is 2.19 times more volatile than CHINA OIL AND. It trades about 0.14 of its potential returns per unit of risk. CHINA OIL AND is currently generating about 0.12 per unit of risk. If you would invest  20,126  in Apple Inc on September 3, 2024 and sell it today you would earn a total of  2,309  from holding Apple Inc or generate 11.47% 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.  CHINA OIL AND

Apple Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CHINA OIL AND

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA OIL AND are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CHINA OIL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and CHINA OIL

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

The idea behind Apple Inc and CHINA OIL AND 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.