Correlation Between Apple and Restaurant Brands

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

Diversification Opportunities for Apple and Restaurant Brands

0.5

Correlation Coefficient

Apple  Restaurant Brands

Very weak diversification

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

Pair Corralation between Apple and Restaurant Brands

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 1.01 times more return on investment than Restaurant Brands. However, Apple is 1.01 times more volatile than Restaurant Brands International. It trades about 0.12 of its potential returns per unit of risk. Restaurant Brands International is currently generating about 0.11 per unit of risk. If you would invest  3,247  in Apple Inc CDR on September 4, 2024 and sell it today you would earn a total of  308.00  from holding Apple Inc CDR or generate 9.49% return on investment over 90 days.

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

Apple Inc CDR  vs.  Restaurant Brands Internationa

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 January 2025.

Restaurant Brands

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Restaurant Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Restaurant Brands

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

The idea behind Apple Inc CDR and Restaurant Brands International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.