Correlation Between Apple and World Technology

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

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

Diversification Opportunities for Apple and World Technology

-0.1

Correlation Coefficient

Apple  World Technology

Good diversification

The 3 months correlation between Apple and World is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and World Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Technology Corp 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 World Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Technology Corp has no effect on the direction of Apple i.e., Apple and World Technology go up and down completely randomly.

Pair Corralation between Apple and World Technology

Given the investment horizon of 90 days Apple Inc is expected to under-perform the World Technology. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 7.35 times less risky than World Technology. The stock trades about 0.0 of its potential returns per unit of risk. The World Technology Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  30.00  in World Technology Corp on December 2, 2024 and sell it today you would earn a total of  25.00  from holding World Technology Corp or generate 83.33% return on investment over 90 days.

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

Apple Inc  vs.  World Technology Corp

Apple Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

World Technology Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in World Technology Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, World Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and World Technology

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

The idea behind Apple Inc and World Technology Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.