Correlation Between Apple and Pampa Energia

Can any of the company-specific risk be diversified away by investing in both Apple and Pampa Energia 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 Pampa Energia 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 Pampa Energia SA, you can compare the effects of market volatilities on Apple and Pampa Energia 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 Pampa Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Pampa Energia.

Diversification Opportunities for Apple and Pampa Energia

0.31

Correlation Coefficient

Apple  Pampa Energia

Weak diversification

The 3 months correlation between Apple and Pampa is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc DRC and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA 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 Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Apple i.e., Apple and Pampa Energia go up and down completely randomly.

Pair Corralation between Apple and Pampa Energia

Assuming the 90 days trading horizon Apple Inc DRC is expected to generate 0.63 times more return on investment than Pampa Energia. However, Apple Inc DRC is 1.6 times less risky than Pampa Energia. It trades about 0.14 of its potential returns per unit of risk. Pampa Energia SA is currently generating about 0.01 per unit of risk. If you would invest  1,300,000  in Apple Inc DRC on November 28, 2024 and sell it today you would earn a total of  207,500  from holding Apple Inc DRC or generate 15.96% return on investment over 90 days.

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

Apple Inc DRC  vs.  Pampa Energia SA

Apple Inc DRC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc DRC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Pampa Energia SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pampa Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apple and Pampa Energia

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

The idea behind Apple Inc DRC and Pampa Energia SA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.