Correlation Between Apple and Newtopia

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

Diversification Opportunities for Apple and Newtopia

-0.05

Correlation Coefficient

Apple  Newtopia

Good diversification

The 3 months correlation between Apple and Newtopia is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia 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 Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Apple i.e., Apple and Newtopia go up and down completely randomly.

Pair Corralation between Apple and Newtopia

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.19 times more return on investment than Newtopia. However, Apple Inc CDR is 5.36 times less risky than Newtopia. It trades about -0.01 of its potential returns per unit of risk. Newtopia is currently generating about -0.19 per unit of risk. If you would invest  3,331  in Apple Inc CDR on October 24, 2024 and sell it today you would lose (74.00) from holding Apple Inc CDR or give up 2.22% of portfolio value over 90 days.

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

Apple Inc CDR  vs.  Newtopia

Apple Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Apple is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Newtopia is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Apple and Newtopia

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

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