Correlation Between Apple and Elbit Imaging
Can any of the company-specific risk be diversified away by investing in both Apple and Elbit Imaging 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 Elbit Imaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Elbit Imaging, you can compare the effects of market volatilities on Apple and Elbit Imaging 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 Elbit Imaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Elbit Imaging.
Diversification Opportunities for Apple and Elbit Imaging
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Elbit is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Elbit Imaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Imaging 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 Elbit Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Imaging has no effect on the direction of Apple i.e., Apple and Elbit Imaging go up and down completely randomly.
Pair Corralation between Apple and Elbit Imaging
Given the investment horizon of 90 days Apple Inc is expected to generate 0.48 times more return on investment than Elbit Imaging. However, Apple Inc is 2.1 times less risky than Elbit Imaging. It trades about -0.18 of its potential returns per unit of risk. Elbit Imaging is currently generating about -0.13 per unit of risk. If you would invest 19,425 in Apple Inc on January 24, 2024 and sell it today you would lose (2,735) from holding Apple Inc or give up 14.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 79.37% |
| Values | Daily Returns |
Apple Inc vs. Elbit Imaging
Performance |
| Timeline |
| Apple Inc |
| Elbit Imaging |
Apple and Elbit Imaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Elbit Imaging
The main advantage of trading using opposite Apple and Elbit Imaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Elbit Imaging 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 Elbit Imaging will offset losses from the drop in Elbit Imaging's long position.The idea behind Apple Inc and Elbit Imaging 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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