Correlation Between European Residential and Apple

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

By analyzing existing cross correlation between European Residential Real and Apple Inc CDR, you can compare the effects of market volatilities on European Residential and Apple 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 European Residential with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Apple.

Diversification Opportunities for European Residential and Apple

0.6

Correlation Coefficient

European Residential  Apple

Poor diversification

The 3 months correlation between European and Apple is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR and European Residential 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 European Residential Real are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc CDR has no effect on the direction of European Residential i.e., European Residential and Apple go up and down completely randomly.

Pair Corralation between European Residential and Apple

Assuming the 90 days trading horizon European Residential Real is expected to generate 2.02 times more return on investment than Apple. However, European Residential is 2.02 times more volatile than Apple Inc CDR. It trades about 0.16 of its potential returns per unit of risk. Apple Inc CDR is currently generating about 0.19 per unit of risk. If you would invest  294.00  in European Residential Real on September 15, 2024 and sell it today you would earn a total of  72.00  from holding European Residential Real or generate 24.49% return on investment over 90 days.

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

European Residential Real  vs.  Apple Inc CDR

European Residential Real

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Residential and Apple

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

The idea behind European Residential Real and Apple Inc CDR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.