Correlation Between Apple and Carebook Technologies

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

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

Diversification Opportunities for Apple and Carebook Technologies

-0.71

Correlation Coefficient

Apple  Carebook Technologies

Pay attention - limited upside

The 3 months correlation between Apple and Carebook is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Carebook Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carebook Technologies 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 CDR are associated (or correlated) with Carebook Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carebook Technologies has no effect on the direction of Apple i.e., Apple and Carebook Technologies go up and down completely randomly.

Pair Corralation between Apple and Carebook Technologies

Assuming the 90 days trading horizon Apple Inc CDR is expected to under-perform the Carebook Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc CDR is 24.57 times less risky than Carebook Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The Carebook Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5.50  in Carebook Technologies on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Carebook Technologies or generate 72.73% return on investment over 90 days.

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

Apple Inc CDR  vs.  Carebook Technologies

Apple Inc CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Carebook Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carebook Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Carebook Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Carebook Technologies

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

The idea behind Apple Inc CDR and Carebook Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.