Correlation Between Apple and Textron

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

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

Diversification Opportunities for Apple and Textron

0.5

Correlation Coefficient

Apple  Textron

Very weak diversification

The 3 months correlation between Apple and Textron is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Apple i.e., Apple and Textron go up and down completely randomly.

Pair Corralation between Apple and Textron

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Textron. In addition to that, Apple is 1.15 times more volatile than Textron. It trades about -0.12 of its total potential returns per unit of risk. Textron is currently generating about -0.1 per unit of volatility. If you would invest  165,490  in Textron on December 30, 2024 and sell it today you would lose (17,802) from holding Textron or give up 10.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Apple Inc  vs.  Textron

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Textron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Apple and Textron

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

The idea behind Apple Inc and Textron 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 CEOs Directory module to screen CEOs from public companies around the world.