Correlation Between Apple and Patterson Companies

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

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

Diversification Opportunities for Apple and Patterson Companies

0.89

Correlation Coefficient

Apple  Patterson Companies

Very poor diversification

The 3 months correlation between Apple and Patterson is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Apple i.e., Apple and Patterson Companies go up and down completely randomly.

Pair Corralation between Apple and Patterson Companies

Assuming the 90 days trading horizon Apple is expected to generate 4.75 times less return on investment than Patterson Companies. But when comparing it to its historical volatility, Apple Inc is 4.17 times less risky than Patterson Companies. It trades about 0.16 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,805  in Patterson Companies on October 10, 2024 and sell it today you would earn a total of  1,155  from holding Patterson Companies or generate 63.99% return on investment over 90 days.

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

Apple Inc  vs.  Patterson Companies

Apple Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Patterson Companies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Patterson Companies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Patterson Companies

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

The idea behind Apple Inc and Patterson Companies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.