Correlation Between Apple and Alphabet

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

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

Diversification Opportunities for Apple and Alphabet

0.44

Correlation Coefficient

Apple  Alphabet

Very weak diversification

The 3 months correlation between Apple and Alphabet is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc DRC and Alphabet Inc Class A CEDEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 DRC are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Apple i.e., Apple and Alphabet go up and down completely randomly.

Pair Corralation between Apple and Alphabet

Assuming the 90 days trading horizon Apple Inc DRC is expected to generate 0.68 times more return on investment than Alphabet. However, Apple Inc DRC is 1.48 times less risky than Alphabet. It trades about 0.26 of its potential returns per unit of risk. Alphabet Inc Class A CEDEAR is currently generating about -0.35 per unit of risk. If you would invest  1,359,999  in Apple Inc DRC on December 4, 2024 and sell it today you would earn a total of  100,001  from holding Apple Inc DRC or generate 7.35% return on investment over 90 days.

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

Apple Inc DRC  vs.  Alphabet Inc Class A CEDEAR

Apple Inc DRC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc DRC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alphabet Class A

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A CEDEAR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Alphabet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Apple and Alphabet

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

The idea behind Apple Inc DRC and Alphabet Inc Class A CEDEAR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..