Correlation Between Apple and American CuMo

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

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

Diversification Opportunities for Apple and American CuMo

-0.13

Correlation Coefficient

Apple  American CuMo

Good diversification

The 3 months correlation between Apple and American is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining 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 American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of Apple i.e., Apple and American CuMo go up and down completely randomly.

Pair Corralation between Apple and American CuMo

Given the investment horizon of 90 days Apple Inc is expected to under-perform the American CuMo. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 7.99 times less risky than American CuMo. The stock trades about -0.01 of its potential returns per unit of risk. The American CuMo Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in American CuMo Mining on December 4, 2024 and sell it today you would lose (0.50) from holding American CuMo Mining or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Apple Inc  vs.  American CuMo Mining

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.

American CuMo Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American CuMo Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, American CuMo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and American CuMo

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

The idea behind Apple Inc and American CuMo Mining 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.