Correlation Between Apple and National Retail

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

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

Diversification Opportunities for Apple and National Retail

0.24

Correlation Coefficient

Apple  National Retail

Modest diversification

The 3 months correlation between Apple and National is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and National Retail Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Retail Prop 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 National Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Retail Prop has no effect on the direction of Apple i.e., Apple and National Retail go up and down completely randomly.

Pair Corralation between Apple and National Retail

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.33 times more return on investment than National Retail. However, Apple is 1.33 times more volatile than National Retail Properties. It trades about 0.04 of its potential returns per unit of risk. National Retail Properties is currently generating about -0.02 per unit of risk. If you would invest  22,261  in Apple Inc on November 28, 2024 and sell it today you would earn a total of  889.00  from holding Apple Inc or generate 3.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Apple Inc  vs.  National Retail Properties

Apple Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Apple is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

National Retail Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and National Retail

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

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