Correlation Between Industrial and Apple

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

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

Diversification Opportunities for Industrial and Apple

-0.37

Correlation Coefficient

Industrial  Apple

Very good diversification

The 3 months correlation between Industrial and Apple is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Apple go up and down completely randomly.

Pair Corralation between Industrial and Apple

Assuming the 90 days horizon Industrial and Commercial is expected to generate 2.76 times more return on investment than Apple. However, Industrial is 2.76 times more volatile than Apple Inc. It trades about 0.21 of its potential returns per unit of risk. Apple Inc is currently generating about 0.04 per unit of risk. If you would invest  41.00  in Industrial and Commercial on November 29, 2024 and sell it today you would earn a total of  26.00  from holding Industrial and Commercial or generate 63.41% return on investment over 90 days.

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

Industrial and Commercial  vs.  Apple Inc

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Industrial and Apple

The main advantage of trading using opposite Industrial and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.