Correlation Between Apple and Target

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

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

Diversification Opportunities for Apple and Target

-0.41

Correlation Coefficient

Apple  Target

Very good diversification

The 3 months correlation between Apple and Target is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Apple i.e., Apple and Target go up and down completely randomly.

Pair Corralation between Apple and Target

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.39 times more return on investment than Target. However, Apple Inc is 2.59 times less risky than Target. It trades about 0.18 of its potential returns per unit of risk. Target is currently generating about 0.01 per unit of risk. If you would invest  6,397  in Apple Inc on October 10, 2024 and sell it today you would earn a total of  966.00  from holding Apple Inc or generate 15.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Target

Apple Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 14 (%) 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.

Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Target 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 Target

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

The idea behind Apple Inc and Target 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.