Correlation Between Apple and Entrada Therapeutics

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

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

Diversification Opportunities for Apple and Entrada Therapeutics

0.38

Correlation Coefficient

Apple  Entrada Therapeutics

Weak diversification

The 3 months correlation between Apple and Entrada is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Entrada Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entrada Therapeutics 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 Entrada Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entrada Therapeutics has no effect on the direction of Apple i.e., Apple and Entrada Therapeutics go up and down completely randomly.

Pair Corralation between Apple and Entrada Therapeutics

Given the investment horizon of 90 days Apple is expected to generate 1.22 times less return on investment than Entrada Therapeutics. But when comparing it to its historical volatility, Apple Inc is 3.79 times less risky than Entrada Therapeutics. It trades about 0.11 of its potential returns per unit of risk. Entrada Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,344  in Entrada Therapeutics on September 24, 2024 and sell it today you would earn a total of  415.00  from holding Entrada Therapeutics or generate 30.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Apple Inc  vs.  Entrada Therapeutics

Apple Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Entrada Therapeutics

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entrada Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Entrada Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Entrada Therapeutics

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

The idea behind Apple Inc and Entrada Therapeutics 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.