Correlation Between Apple and Foreign Bond
Can any of the company-specific risk be diversified away by investing in both Apple and Foreign Bond 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 Foreign Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Foreign Bond Fund, you can compare the effects of market volatilities on Apple and Foreign Bond 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 Foreign Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Foreign Bond.
Diversification Opportunities for Apple and Foreign Bond
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Apple and Foreign is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Bond 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 Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Apple i.e., Apple and Foreign Bond go up and down completely randomly.
Pair Corralation between Apple and Foreign Bond
Given the investment horizon of 90 days Apple Inc is expected to generate 4.27 times more return on investment than Foreign Bond. However, Apple is 4.27 times more volatile than Foreign Bond Fund. It trades about -0.01 of its potential returns per unit of risk. Foreign Bond Fund is currently generating about -0.28 per unit of risk. If you would invest 16,971 in Apple Inc on January 26, 2024 and sell it today you would lose (69.00) from holding Apple Inc or give up 0.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Foreign Bond Fund
Performance |
| Timeline |
| Apple Inc |
| Foreign Bond |
Apple and Foreign Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Foreign Bond
The main advantage of trading using opposite Apple and Foreign Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Foreign Bond 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 Foreign Bond will offset losses from the drop in Foreign Bond's long position.The idea behind Apple Inc and Foreign Bond Fund 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.| Foreign Bond vs. Advent Claymore Convertible | Foreign Bond vs. Absolute Convertible Arbitrage | Foreign Bond vs. Lord Abbett Vertible | Foreign Bond vs. Columbia Vertible Securities |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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