Correlation Between Apple and STANDARD SUPPLY

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

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

Diversification Opportunities for Apple and STANDARD SUPPLY

-0.66

Correlation Coefficient

Apple  STANDARD SUPPLY

Excellent diversification

The 3 months correlation between Apple and STANDARD is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and STANDARD SUPPLY NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STANDARD SUPPLY NK 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 STANDARD SUPPLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STANDARD SUPPLY NK has no effect on the direction of Apple i.e., Apple and STANDARD SUPPLY go up and down completely randomly.

Pair Corralation between Apple and STANDARD SUPPLY

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.16 times more return on investment than STANDARD SUPPLY. However, Apple Inc is 6.11 times less risky than STANDARD SUPPLY. It trades about 0.2 of its potential returns per unit of risk. STANDARD SUPPLY NK is currently generating about -0.18 per unit of risk. If you would invest  21,629  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  2,131  from holding Apple Inc or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Apple Inc  vs.  STANDARD SUPPLY NK

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

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. In spite of rather fragile fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

STANDARD SUPPLY NK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STANDARD SUPPLY NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Apple and STANDARD SUPPLY

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

The idea behind Apple Inc and STANDARD SUPPLY NK 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.