Correlation Between Apple and MCF Energy

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

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

Diversification Opportunities for Apple and MCF Energy

-0.72

Correlation Coefficient

Apple  MCF Energy

Pay attention - limited upside

The 3 months correlation between Apple and MCF is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Apple i.e., Apple and MCF Energy go up and down completely randomly.

Pair Corralation between Apple and MCF Energy

Given the investment horizon of 90 days Apple Inc is expected to generate 0.16 times more return on investment than MCF Energy. However, Apple Inc is 6.14 times less risky than MCF Energy. It trades about 0.14 of its potential returns per unit of risk. MCF Energy is currently generating about -0.16 per unit of risk. If you would invest  22,226  in Apple Inc on September 13, 2024 and sell it today you would earn a total of  2,423  from holding Apple Inc or generate 10.9% return on investment over 90 days.

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

Apple Inc  vs.  MCF Energy

Apple Inc

Risk-Adjusted Performance

11 of 100

OK

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 January 2025.

MCF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Apple and MCF Energy

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

The idea behind Apple Inc and MCF Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..