Correlation Between Apple and Western Energy

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

Diversification Opportunities for Apple and Western Energy

0.39

Correlation Coefficient

Apple  Western Energy

Weak diversification

The 3 months correlation between Apple and Western is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Western Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Energy Services 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 Western Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Energy Services has no effect on the direction of Apple i.e., Apple and Western Energy go up and down completely randomly.

Pair Corralation between Apple and Western Energy

Assuming the 90 days trading horizon Apple Inc CDR is expected to under-perform the Western Energy. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc CDR is 2.35 times less risky than Western Energy. The stock trades about -0.14 of its potential returns per unit of risk. The Western Energy Services is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  255.00  in Western Energy Services on December 22, 2024 and sell it today you would lose (36.00) from holding Western Energy Services or give up 14.12% of portfolio value over 90 days.

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

Apple Inc CDR  vs.  Western Energy Services

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Western Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Apple and Western Energy

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

The idea behind Apple Inc CDR and Western Energy Services 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.