Correlation Between US Financial and Apple

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

By analyzing existing cross correlation between US Financial 15 and Apple Inc CDR, you can compare the effects of market volatilities on US Financial 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 US Financial with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and Apple.

Diversification Opportunities for US Financial and Apple

-0.02

Correlation Coefficient

US Financial  Apple

Good diversification

The 3 months correlation between FTU and Apple is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR and US Financial 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 US Financial 15 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 CDR has no effect on the direction of US Financial i.e., US Financial and Apple go up and down completely randomly.

Pair Corralation between US Financial and Apple

Assuming the 90 days trading horizon US Financial 15 is expected to generate 7.31 times more return on investment than Apple. However, US Financial is 7.31 times more volatile than Apple Inc CDR. It trades about 0.15 of its potential returns per unit of risk. Apple Inc CDR is currently generating about -0.03 per unit of risk. If you would invest  38.00  in US Financial 15 on October 22, 2024 and sell it today you would earn a total of  30.00  from holding US Financial 15 or generate 78.95% return on investment over 90 days.

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

US Financial 15  vs.  Apple Inc CDR

US Financial 15

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, US Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Apple is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with US Financial and Apple

The main advantage of trading using opposite US Financial and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial 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 US Financial 15 and Apple Inc CDR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.