Correlation Between Apple and KWESST MICRO

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

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

Diversification Opportunities for Apple and KWESST MICRO

0.68

Correlation Coefficient

Apple  KWESST MICRO

Poor diversification

The 3 months correlation between Apple and KWESST is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and KWESST MICRO SYSINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST MICRO SYSINC 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 KWESST MICRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST MICRO SYSINC has no effect on the direction of Apple i.e., Apple and KWESST MICRO go up and down completely randomly.

Pair Corralation between Apple and KWESST MICRO

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.19 times more return on investment than KWESST MICRO. However, Apple Inc is 5.32 times less risky than KWESST MICRO. It trades about -0.13 of its potential returns per unit of risk. KWESST MICRO SYSINC is currently generating about -0.09 per unit of risk. If you would invest  24,349  in Apple Inc on December 28, 2024 and sell it today you would lose (3,664) from holding Apple Inc or give up 15.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Apple Inc  vs.  KWESST MICRO SYSINC

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KWESST MICRO SYSINC

Risk-Adjusted Performance

Very Weak

Over the last 90 days KWESST MICRO SYSINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Apple and KWESST MICRO

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

The idea behind Apple Inc and KWESST MICRO SYSINC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.