Correlation Between Apple and VanEck Biotech
Can any of the company-specific risk be diversified away by investing in both Apple and VanEck Biotech 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 VanEck Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and VanEck Biotech ETF, you can compare the effects of market volatilities on Apple and VanEck Biotech 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 VanEck Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and VanEck Biotech.
Diversification Opportunities for Apple and VanEck Biotech
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Apple and VanEck is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF 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 VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of Apple i.e., Apple and VanEck Biotech go up and down completely randomly.
Pair Corralation between Apple and VanEck Biotech
Given the investment horizon of 90 days Apple Inc is expected to generate 1.47 times more return on investment than VanEck Biotech. However, Apple is 1.47 times more volatile than VanEck Biotech ETF. It trades about -0.1 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about -0.33 per unit of risk. If you would invest 17,085 in Apple Inc on January 24, 2024 and sell it today you would lose (501.00) from holding Apple Inc or give up 2.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. VanEck Biotech ETF
Performance |
| Timeline |
| Apple Inc |
| VanEck Biotech ETF |
Apple and VanEck Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and VanEck Biotech
The main advantage of trading using opposite Apple and VanEck Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, VanEck Biotech 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 VanEck Biotech will offset losses from the drop in VanEck Biotech's long position.The idea behind Apple Inc and VanEck Biotech ETF 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.| VanEck Biotech vs. VanEck Pharmaceutical ETF | VanEck Biotech vs. VanEck Retail ETF | VanEck Biotech vs. First Trust NYSE | VanEck Biotech vs. Invesco Dynamic Biotechnology |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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