Correlation Between Apple and Atmos Energy

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

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

Diversification Opportunities for Apple and Atmos Energy

0.82

Correlation Coefficient

Apple  Atmos Energy

Very poor diversification

The 3 months correlation between Apple and Atmos is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Apple i.e., Apple and Atmos Energy go up and down completely randomly.

Pair Corralation between Apple and Atmos Energy

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.15 times more return on investment than Atmos Energy. However, Apple is 1.15 times more volatile than Atmos Energy. It trades about 0.2 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.14 per unit of risk. If you would invest  20,086  in Apple Inc on September 12, 2024 and sell it today you would earn a total of  3,284  from holding Apple Inc or generate 16.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Apple Inc  vs.  Atmos Energy

Apple Inc

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Atmos Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Atmos Energy

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

The idea behind Apple Inc and Atmos Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.