Correlation Between Apple and Power Assets

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

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

Diversification Opportunities for Apple and Power Assets

0.8

Correlation Coefficient

Apple  Power Assets

Very poor diversification

The 3 months correlation between Apple and Power is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of Apple i.e., Apple and Power Assets go up and down completely randomly.

Pair Corralation between Apple and Power Assets

Assuming the 90 days trading horizon Apple is expected to generate 1.04 times less return on investment than Power Assets. But when comparing it to its historical volatility, Apple Inc is 1.93 times less risky than Power Assets. It trades about 0.7 of its potential returns per unit of risk. Power Assets Holdings is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  615.00  in Power Assets Holdings on October 1, 2024 and sell it today you would earn a total of  45.00  from holding Power Assets Holdings or generate 7.32% 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.  Power Assets Holdings

Apple Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Power Assets Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Power Assets Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Power Assets reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Power Assets

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

The idea behind Apple Inc and Power Assets Holdings 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.