Correlation Between Apple and Loyalty Ventures

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

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

Diversification Opportunities for Apple and Loyalty Ventures

-0.83

Correlation Coefficient

Apple  Loyalty Ventures

Pay attention - limited upside

The 3 months correlation between Apple and Loyalty is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Loyalty Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loyalty Ventures 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 Loyalty Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loyalty Ventures has no effect on the direction of Apple i.e., Apple and Loyalty Ventures go up and down completely randomly.

Pair Corralation between Apple and Loyalty Ventures

Given the investment horizon of 90 days Apple Inc is expected to generate 0.03 times more return on investment than Loyalty Ventures. However, Apple Inc is 29.68 times less risky than Loyalty Ventures. It trades about 0.09 of its potential returns per unit of risk. Loyalty Ventures is currently generating about -0.16 per unit of risk. If you would invest  15,163  in Apple Inc on October 5, 2024 and sell it today you would earn a total of  9,222  from holding Apple Inc or generate 60.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	5.49%
Values	Daily Returns

Apple Inc  vs.  Loyalty Ventures

Apple Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Loyalty Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loyalty Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Loyalty Ventures is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Loyalty Ventures

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

The idea behind Apple Inc and Loyalty Ventures 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.