Correlation Between Apple and Morgan Advanced

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

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

Diversification Opportunities for Apple and Morgan Advanced

0.03

Correlation Coefficient

Apple  Morgan Advanced

Significant diversification

The 3 months correlation between Apple and Morgan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Apple i.e., Apple and Morgan Advanced go up and down completely randomly.

Pair Corralation between Apple and Morgan Advanced

Assuming the 90 days trading horizon Apple Inc is expected to generate 2.71 times more return on investment than Morgan Advanced. However, Apple is 2.71 times more volatile than Morgan Advanced Materials. It trades about 0.03 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.12 per unit of risk. If you would invest  23,169  in Apple Inc on September 2, 2024 and sell it today you would earn a total of  481.00  from holding Apple Inc or generate 2.08% 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.  Morgan Advanced Materials

Apple Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Morgan Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Apple and Morgan Advanced

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

The idea behind Apple Inc and Morgan Advanced Materials 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.