Correlation Between Apple and DexCom

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

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

Diversification Opportunities for Apple and DexCom

0.88

Correlation Coefficient

Apple  DexCom

Very poor diversification

The 3 months correlation between Apple and DexCom is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc 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 DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Apple i.e., Apple and DexCom go up and down completely randomly.

Pair Corralation between Apple and DexCom

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.44 times more return on investment than DexCom. However, Apple Inc is 2.25 times less risky than DexCom. It trades about 0.08 of its potential returns per unit of risk. DexCom Inc is currently generating about 0.0 per unit of risk. If you would invest  14,134  in Apple Inc on October 10, 2024 and sell it today you would earn a total of  9,436  from holding Apple Inc or generate 66.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Apple Inc  vs.  DexCom Inc

Apple Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 13 (%) 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.

DexCom Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, DexCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and DexCom

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

The idea behind Apple Inc and DexCom Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.