Correlation Between Apple and Highland Copper

Can any of the company-specific risk be diversified away by investing in both Apple and Highland Copper 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 Highland Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and Highland Copper, you can compare the effects of market volatilities on Apple and Highland Copper 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 Highland Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Highland Copper.

Diversification Opportunities for Apple and Highland Copper

0.26

Correlation Coefficient

Apple  Highland Copper

Modest diversification

The 3 months correlation between Apple and Highland is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper 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 are associated (or correlated) with Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of Apple i.e., Apple and Highland Copper go up and down completely randomly.

Pair Corralation between Apple and Highland Copper

Given the investment horizon of 90 days Apple is expected to generate 2.53 times less return on investment than Highland Copper. But when comparing it to its historical volatility, Apple Inc is 5.04 times less risky than Highland Copper. It trades about 0.07 of its potential returns per unit of risk. Highland Copper is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.25  in Highland Copper on December 8, 2024 and sell it today you would earn a total of  0.36  from holding Highland Copper or generate 5.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.17%
Values	Daily Returns

Apple Inc  vs.  Highland Copper

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Highland Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Highland Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and Highland Copper

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

The idea behind Apple Inc and Highland Copper 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.