Correlation Between Apple and Canadian Utilities

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

Diversification Opportunities for Apple and Canadian Utilities

0.69

Correlation Coefficient

Apple  Canadian Utilities

Poor diversification

The 3 months correlation between Apple and Canadian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Apple i.e., Apple and Canadian Utilities go up and down completely randomly.

Pair Corralation between Apple and Canadian Utilities

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 1.76 times more return on investment than Canadian Utilities. However, Apple is 1.76 times more volatile than Canadian Utilities Ltd. It trades about 0.14 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about 0.04 per unit of risk. If you would invest  3,253  in Apple Inc CDR on October 5, 2024 and sell it today you would earn a total of  316.00  from holding Apple Inc CDR or generate 9.71% return on investment over 90 days.

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

Apple Inc CDR  vs.  Canadian Utilities Ltd

Apple Inc CDR

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 11 (%) 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.

Canadian Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Canadian Utilities

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

The idea behind Apple Inc CDR and Canadian Utilities Ltd 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.