Correlation Between Consolidated Communications and Apple

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

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

Diversification Opportunities for Consolidated Communications and Apple

0.89

Correlation Coefficient

Consolidated Communications  Apple

Very poor diversification

The 3 months correlation between Consolidated and Apple is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and Apple go up and down completely randomly.

Pair Corralation between Consolidated Communications and Apple

Assuming the 90 days horizon Consolidated Communications is expected to generate 5.41 times less return on investment than Apple. But when comparing it to its historical volatility, Consolidated Communications Holdings is 1.45 times less risky than Apple. It trades about 0.18 of its potential returns per unit of risk. Apple Inc is currently generating about 0.68 of returns per unit of risk over similar time horizon. If you would invest  22,065  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  2,265  from holding Apple Inc or generate 10.27% return on investment over 90 days.

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

Consolidated Communications Ho  vs.  Apple Inc

Consolidated Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consolidated Communications and Apple

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

The idea behind Consolidated Communications Holdings and Apple 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.