Correlation Between Apple and Iluka Resources

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

By analyzing existing cross correlation between Apple Inc and Iluka Resources Limited, you can compare the effects of market volatilities on Apple and Iluka Resources 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 Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Iluka Resources.

Diversification Opportunities for Apple and Iluka Resources

0.07

Correlation Coefficient

Apple  Iluka Resources

Significant diversification

The 3 months correlation between Apple and Iluka is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Iluka Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iluka Resources 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 Iluka Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iluka Resources has no effect on the direction of Apple i.e., Apple and Iluka Resources go up and down completely randomly.

Pair Corralation between Apple and Iluka Resources

Given the investment horizon of 90 days Apple Inc is expected to under-perform the Iluka Resources. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.64 times less risky than Iluka Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Iluka Resources Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  431.00  in Iluka Resources Limited on January 26, 2024 and sell it today you would earn a total of  47.00  from holding Iluka Resources Limited or generate 10.9% return on investment over 90 days.

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

Apple Inc  vs.  Iluka Resources Limited

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Iluka Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iluka Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Iluka Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and Iluka Resources

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

The idea behind Apple Inc and Iluka Resources Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .