Correlation Between Apple and LPL Financial

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

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

Diversification Opportunities for Apple and LPL Financial

0.85

Correlation Coefficient

Apple  LPL Financial

Very poor diversification

The 3 months correlation between Apple and LPL is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings 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 LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Apple i.e., Apple and LPL Financial go up and down completely randomly.

Pair Corralation between Apple and LPL Financial

Assuming the 90 days trading horizon Apple is expected to generate 6.94 times less return on investment than LPL Financial. In addition to that, Apple is 1.24 times more volatile than LPL Financial Holdings. It trades about 0.02 of its total potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.17 per unit of volatility. If you would invest  11,022  in LPL Financial Holdings on October 8, 2024 and sell it today you would earn a total of  424.00  from holding LPL Financial Holdings or generate 3.85% 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.  LPL Financial Holdings

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) 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.

LPL Financial Holdings

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and LPL Financial

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

The idea behind Apple Inc and LPL Financial Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.