Correlation Between Apple and SPoT Coffee

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

Diversification Opportunities for Apple and SPoT Coffee

0.0

Correlation Coefficient

Apple  SPoT Coffee

Pay attention - limited upside

The 3 months correlation between Apple and SPoT is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and SPoT Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPoT Coffee 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 SPoT Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPoT Coffee has no effect on the direction of Apple i.e., Apple and SPoT Coffee go up and down completely randomly.

Pair Corralation between Apple and SPoT Coffee

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.18 times more return on investment than SPoT Coffee. However, Apple Inc CDR is 5.53 times less risky than SPoT Coffee. It trades about 0.07 of its potential returns per unit of risk. SPoT Coffee is currently generating about -0.01 per unit of risk. If you would invest  2,862  in Apple Inc CDR on September 4, 2024 and sell it today you would earn a total of  693.00  from holding Apple Inc CDR or generate 24.21% return on investment over 90 days.

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

Apple Inc CDR  vs.  SPoT Coffee

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.

SPoT Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPoT Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPoT Coffee 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 SPoT Coffee

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

The idea behind Apple Inc CDR and SPoT Coffee 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.