Correlation Between Apple and SIRIUS XM

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

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

Diversification Opportunities for Apple and SIRIUS XM

0.47

Correlation Coefficient

Apple  SIRIUS XM

Very weak diversification

The 3 months correlation between Apple and SIRIUS is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and SIRIUS XM RADIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIRIUS XM RADIO 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 SIRIUS XM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIRIUS XM RADIO has no effect on the direction of Apple i.e., Apple and SIRIUS XM go up and down completely randomly.

Pair Corralation between Apple and SIRIUS XM

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.48 times more return on investment than SIRIUS XM. However, Apple Inc is 2.09 times less risky than SIRIUS XM. It trades about 0.06 of its potential returns per unit of risk. SIRIUS XM RADIO is currently generating about 0.01 per unit of risk. If you would invest  22,376  in Apple Inc on November 28, 2024 and sell it today you would earn a total of  1,149  from holding Apple Inc or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.44%
Values	Daily Returns

Apple Inc  vs.  SIRIUS XM RADIO

Apple Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Apple is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SIRIUS XM RADIO

Risk-Adjusted Performance

Weak

Over the last 90 days SIRIUS XM RADIO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIRIUS XM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and SIRIUS XM

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

The idea behind Apple Inc and SIRIUS XM RADIO 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.