Correlation Between Apple and G-III Apparel

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

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

Diversification Opportunities for Apple and G-III Apparel

0.84

Correlation Coefficient

Apple  G-III Apparel

Very poor diversification

The 3 months correlation between Apple and G-III is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and G III Apparel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III Apparel 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 G-III Apparel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III Apparel has no effect on the direction of Apple i.e., Apple and G-III Apparel go up and down completely randomly.

Pair Corralation between Apple and G-III Apparel

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.5 times more return on investment than G-III Apparel. However, Apple Inc is 2.02 times less risky than G-III Apparel. It trades about 0.1 of its potential returns per unit of risk. G III Apparel Group is currently generating about 0.03 per unit of risk. If you would invest  16,832  in Apple Inc on October 5, 2024 and sell it today you would earn a total of  7,398  from holding Apple Inc or generate 43.95% 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.  G III Apparel Group

Apple Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

G III Apparel

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days G III Apparel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, G-III Apparel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and G-III Apparel

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

The idea behind Apple Inc and G III Apparel Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.