Correlation Between Target and Apple

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

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

Diversification Opportunities for Target and Apple

-0.34

Correlation Coefficient

Target  Apple

Very good diversification

The 3 months correlation between Target and Apple is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Target and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Target 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 Target 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 Target i.e., Target and Apple go up and down completely randomly.

Pair Corralation between Target and Apple

Assuming the 90 days trading horizon Target is expected to generate 1.93 times less return on investment than Apple. In addition to that, Target is 1.75 times more volatile than Apple Inc. It trades about 0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.15 per unit of volatility. If you would invest  4,646  in Apple Inc on October 2, 2024 and sell it today you would earn a total of  3,104  from holding Apple Inc or generate 66.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.96%
Values	Daily Returns

Target  vs.  Apple Inc

Target

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Apple Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target and Apple

The main advantage of trading using opposite Target and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.