Correlation Between Apple and WGHT WTCHER

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

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

Diversification Opportunities for Apple and WGHT WTCHER

0.67

Correlation Coefficient

Apple  WGHT WTCHER

Poor diversification

The 3 months correlation between Apple and WGHT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and WGHT WTCHER INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGHT WTCHER INTL 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 WGHT WTCHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGHT WTCHER INTL has no effect on the direction of Apple i.e., Apple and WGHT WTCHER go up and down completely randomly.

Pair Corralation between Apple and WGHT WTCHER

Assuming the 90 days trading horizon Apple is expected to generate 4.62 times less return on investment than WGHT WTCHER. But when comparing it to its historical volatility, Apple Inc is 11.12 times less risky than WGHT WTCHER. It trades about 0.55 of its potential returns per unit of risk. WGHT WTCHER INTL is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  96.00  in WGHT WTCHER INTL on September 23, 2024 and sell it today you would earn a total of  41.00  from holding WGHT WTCHER INTL or generate 42.71% return on investment over 90 days.

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

Apple Inc  vs.  WGHT WTCHER INTL

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) 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.

WGHT WTCHER INTL

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WGHT WTCHER INTL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, WGHT WTCHER unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and WGHT WTCHER

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

The idea behind Apple Inc and WGHT WTCHER INTL 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.