Correlation Between Apple and Compania

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

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

Diversification Opportunities for Apple and Compania

-0.17

Correlation Coefficient

Apple  Compania

Good diversification

The 3 months correlation between Apple and Compania is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Apple i.e., Apple and Compania go up and down completely randomly.

Pair Corralation between Apple and Compania

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Compania. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.16 times less risky than Compania. The stock trades about -0.07 of its potential returns per unit of risk. The Compania de Minas is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,366  in Compania de Minas on December 22, 2024 and sell it today you would earn a total of  174.00  from holding Compania de Minas or generate 12.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Apple Inc  vs.  Compania de Minas

Apple Inc

Risk-Adjusted Performance

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 weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Compania de Minas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Compania displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Compania

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

The idea behind Apple Inc and Compania de Minas 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.