Correlation Between World Technology and Apple

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

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

Diversification Opportunities for World Technology and Apple

-0.33

Correlation Coefficient

World Technology  Apple

Very good diversification

The 3 months correlation between World and Apple is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding World Technology Corp and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and World Technology 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 World Technology Corp 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 World Technology i.e., World Technology and Apple go up and down completely randomly.

Pair Corralation between World Technology and Apple

Given the investment horizon of 90 days World Technology Corp is expected to under-perform the Apple. In addition to that, World Technology is 11.71 times more volatile than Apple Inc. It trades about 0.0 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.12 per unit of volatility. If you would invest  22,214  in Apple Inc on September 5, 2024 and sell it today you would earn a total of  2,051  from holding Apple Inc or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

World Technology Corp  vs.  Apple Inc

World Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, World Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Apple Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with World Technology and Apple

The main advantage of trading using opposite World Technology and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Technology 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 World Technology Corp 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.