Correlation Between Vroom and Apple

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Can any of the company-specific risk be diversified away by investing in both Vroom 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 Vroom and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vroom Inc and Apple Inc, you can compare the effects of market volatilities on Vroom 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 Vroom with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vroom and Apple.

Diversification Opportunities for Vroom and Apple

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vroom and Apple is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vroom Inc and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Vroom 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 Vroom Inc 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 has no effect on the direction of Vroom i.e., Vroom and Apple go up and down completely randomly.

Pair Corralation between Vroom and Apple

Considering the 90-day investment horizon Vroom Inc is expected to under-perform the Apple. In addition to that, Vroom is 3.63 times more volatile than Apple Inc. It trades about -0.09 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.01 per unit of volatility. If you would invest  14,789  in Apple Inc on September 5, 2022 and sell it today you would lose (8.00)  from holding Apple Inc or give up 0.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.68%
ValuesDaily Returns

Vroom Inc  vs.  Apple Inc

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom Price Channel

Apple Inc 
Apple Performance
0 of 100
Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Vroom and Apple Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Apple

The main advantage of trading using opposite Vroom and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom 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.
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The idea behind Vroom Inc and Apple Inc 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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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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