Correlation Between Apple and MOTOROLA SOLTN

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

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

Diversification Opportunities for Apple and MOTOROLA SOLTN

0.82

Correlation Coefficient

Apple  MOTOROLA SOLTN

Very poor diversification

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

Pair Corralation between Apple and MOTOROLA SOLTN

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.01 times more return on investment than MOTOROLA SOLTN. However, Apple is 1.01 times more volatile than MOTOROLA SOLTN . It trades about 0.17 of its potential returns per unit of risk. MOTOROLA SOLTN is currently generating about 0.15 per unit of risk. If you would invest  20,151  in Apple Inc on September 12, 2024 and sell it today you would earn a total of  3,289  from holding Apple Inc or generate 16.32% return on investment over 90 days.

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

Apple Inc  vs.  MOTOROLA SOLTN

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

MOTOROLA SOLTN

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MOTOROLA SOLTN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MOTOROLA SOLTN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and MOTOROLA SOLTN

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

The idea behind Apple Inc and MOTOROLA SOLTN 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.