Correlation Between Apple and Exco Technologies

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

Diversification Opportunities for Apple and Exco Technologies

-0.63

Correlation Coefficient

Apple  Exco Technologies

Excellent diversification

The 3 months correlation between Apple and Exco is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Exco Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exco Technologies 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 Exco Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exco Technologies has no effect on the direction of Apple i.e., Apple and Exco Technologies go up and down completely randomly.

Pair Corralation between Apple and Exco Technologies

Assuming the 90 days trading horizon Apple Inc CDR is expected to under-perform the Exco Technologies. In addition to that, Apple is 1.58 times more volatile than Exco Technologies Limited. It trades about -0.27 of its total potential returns per unit of risk. Exco Technologies Limited is currently generating about -0.04 per unit of volatility. If you would invest  746.00  in Exco Technologies Limited on October 20, 2024 and sell it today you would lose (6.00) from holding Exco Technologies Limited or give up 0.8% of portfolio value over 90 days.

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

Apple Inc CDR  vs.  Exco Technologies Limited

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.

Exco Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exco Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's 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 Exco Technologies

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

The idea behind Apple Inc CDR and Exco Technologies Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.