Correlation Between Apple and Global X

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

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

Diversification Opportunities for Apple and Global X

0.87

Correlation Coefficient

Apple  Global X

Very poor diversification

The 3 months correlation between Apple and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of Apple i.e., Apple and Global X go up and down completely randomly.

Pair Corralation between Apple and Global X

Assuming the 90 days trading horizon Apple is expected to generate 1.04 times less return on investment than Global X. In addition to that, Apple is 1.08 times more volatile than Global X Funds. It trades about 0.2 of its total potential returns per unit of risk. Global X Funds is currently generating about 0.23 per unit of volatility. If you would invest  4,188  in Global X Funds on September 13, 2024 and sell it today you would earn a total of  862.00  from holding Global X Funds or generate 20.58% return on investment over 90 days.

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

Apple Inc  vs.  Global X Funds

Apple Inc

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X Funds

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Global X

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

The idea behind Apple Inc and Global X Funds 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.