Correlation Between Apple and COVANTA

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

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

Diversification Opportunities for Apple and COVANTA

-0.36

Correlation Coefficient

Apple  COVANTA

Very good diversification

The 3 months correlation between Apple and COVANTA is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P 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 COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of Apple i.e., Apple and COVANTA go up and down completely randomly.

Pair Corralation between Apple and COVANTA

Given the investment horizon of 90 days Apple Inc is expected to generate 0.59 times more return on investment than COVANTA. However, Apple Inc is 1.68 times less risky than COVANTA. It trades about 0.15 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about -0.13 per unit of risk. If you would invest  22,145  in Apple Inc on October 6, 2024 and sell it today you would earn a total of  2,191  from holding Apple Inc or generate 9.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Apple Inc  vs.  COVANTA HLDG P

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.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COVANTA HLDG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for COVANTA HLDG P investors.

Pair Trading with Apple and COVANTA

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

The idea behind Apple Inc and COVANTA HLDG P 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .