Correlation Between Apple and MOUNT GIBSON

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

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

Diversification Opportunities for Apple and MOUNT GIBSON

-0.22

Correlation Coefficient

Apple  MOUNT GIBSON

Very good diversification

The 3 months correlation between Apple and MOUNT is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and MOUNT GIBSON IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOUNT GIBSON IRON 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 MOUNT GIBSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOUNT GIBSON IRON has no effect on the direction of Apple i.e., Apple and MOUNT GIBSON go up and down completely randomly.

Pair Corralation between Apple and MOUNT GIBSON

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.35 times more return on investment than MOUNT GIBSON. However, Apple Inc is 2.83 times less risky than MOUNT GIBSON. It trades about 0.28 of its potential returns per unit of risk. MOUNT GIBSON IRON is currently generating about -0.09 per unit of risk. If you would invest  21,195  in Apple Inc on October 9, 2024 and sell it today you would earn a total of  2,390  from holding Apple Inc or generate 11.28% return on investment over 90 days.

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

Apple Inc  vs.  MOUNT GIBSON IRON

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

MOUNT GIBSON IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MOUNT GIBSON IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Apple and MOUNT GIBSON

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

The idea behind Apple Inc and MOUNT GIBSON IRON 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.