Correlation Between Altria and Apple

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

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

Diversification Opportunities for Altria and Apple

0.18

Correlation Coefficient

Altria  Apple

Average diversification

The 3 months correlation between Altria and Apple is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Altria 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 Altria Group 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 Altria i.e., Altria and Apple go up and down completely randomly.

Pair Corralation between Altria and Apple

Allowing for the 90-day total investment horizon Altria Group is expected to generate 0.71 times more return on investment than Apple. However, Altria Group is 1.41 times less risky than Apple. It trades about -0.09 of its potential returns per unit of risk. Apple Inc is currently generating about -0.39 per unit of risk. If you would invest  5,282  in Altria Group on October 24, 2024 and sell it today you would lose (96.00) from holding Altria Group or give up 1.82% of portfolio value over 90 days.

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

Altria Group  vs.  Apple Inc

Altria Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Altria may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Altria and Apple

The main advantage of trading using opposite Altria and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria 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 Altria Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.