Correlation Between Apple and Credit Acceptance

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

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

Diversification Opportunities for Apple and Credit Acceptance

0.0

Correlation Coefficient

Apple  Credit Acceptance

Pay attention - limited upside

The 3 months correlation between Apple and Credit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Apple i.e., Apple and Credit Acceptance go up and down completely randomly.

Pair Corralation between Apple and Credit Acceptance

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.76 times more return on investment than Credit Acceptance. However, Apple Inc is 1.32 times less risky than Credit Acceptance. It trades about 0.1 of its potential returns per unit of risk. Credit Acceptance is currently generating about 0.03 per unit of risk. If you would invest  3,762  in Apple Inc on September 4, 2024 and sell it today you would earn a total of  3,518  from holding Apple Inc or generate 93.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.0%
Values	Daily Returns

Apple Inc  vs.  Credit Acceptance

Apple Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) 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.

Credit Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apple and Credit Acceptance

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

The idea behind Apple Inc and Credit Acceptance 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.