Correlation Between Apple and Stantec

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

Diversification Opportunities for Apple and Stantec

0.24

Correlation Coefficient

Apple  Stantec

Modest diversification

The 3 months correlation between Apple and Stantec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec 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 Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Apple i.e., Apple and Stantec go up and down completely randomly.

Pair Corralation between Apple and Stantec

Assuming the 90 days trading horizon Apple is expected to generate 2.89 times less return on investment than Stantec. But when comparing it to its historical volatility, Apple Inc CDR is 1.34 times less risky than Stantec. It trades about 0.01 of its potential returns per unit of risk. Stantec is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12,165  in Stantec on December 2, 2024 and sell it today you would earn a total of  161.00  from holding Stantec or generate 1.32% return on investment over 90 days.

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

Apple Inc CDR  vs.  Stantec

Apple Inc CDR

Risk-Adjusted Performance

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.

Stantec

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Stantec is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Apple and Stantec

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

The idea behind Apple Inc CDR and Stantec 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.