Correlation Between Apple and Rock Tech

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

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

Diversification Opportunities for Apple and Rock Tech

-0.81

Correlation Coefficient

Apple  Rock Tech

Pay attention - limited upside

The 3 months correlation between Apple and Rock is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Apple i.e., Apple and Rock Tech go up and down completely randomly.

Pair Corralation between Apple and Rock Tech

Assuming the 90 days trading horizon Apple is expected to generate 16.49 times less return on investment than Rock Tech. But when comparing it to its historical volatility, Apple Inc is 7.75 times less risky than Rock Tech. It trades about 0.07 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Rock Tech Lithium on October 9, 2024 and sell it today you would earn a total of  10.00  from holding Rock Tech Lithium or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Apple Inc  vs.  Rock Tech Lithium

Apple Inc

Risk-Adjusted Performance

14 of 100

Solid

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 unsteady fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rock Tech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Rock Tech

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

The idea behind Apple Inc and Rock Tech Lithium 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.