Correlation Between Nasdaq and Apple

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

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

Diversification Opportunities for Nasdaq and Apple

-0.76

Correlation Coefficient

Nasdaq  Apple

Pay attention - limited upside

The 3 months correlation between Nasdaq and Apple is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Apple Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc DRC and Nasdaq 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 Nasdaq Inc 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 DRC has no effect on the direction of Nasdaq i.e., Nasdaq and Apple go up and down completely randomly.

Pair Corralation between Nasdaq and Apple

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.81 times more return on investment than Apple. However, Nasdaq Inc is 1.24 times less risky than Apple. It trades about 0.17 of its potential returns per unit of risk. Apple Inc DRC is currently generating about -0.01 per unit of risk. If you would invest  7,308  in Nasdaq Inc on September 14, 2024 and sell it today you would earn a total of  779.00  from holding Nasdaq Inc or generate 10.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Nasdaq Inc  vs.  Apple Inc DRC

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Apple Inc DRC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nasdaq and Apple

The main advantage of trading using opposite Nasdaq and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and Apple Inc DRC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.