Correlation Between United States and Apple

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

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

Diversification Opportunities for United States and Apple

0.08

Correlation Coefficient

United States  Apple

Significant diversification

The 3 months correlation between United and Apple is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Apple go up and down completely randomly.

Pair Corralation between United States and Apple

Given the investment horizon of 90 days United States Steel is expected to generate 0.81 times more return on investment than Apple. However, United States Steel is 1.23 times less risky than Apple. It trades about 0.04 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  987,000  in United States Steel on September 14, 2024 and sell it today you would earn a total of  208,000  from holding United States Steel or generate 21.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.62%
Values	Daily Returns

United States Steel  vs.  Apple Inc DRC

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 United States and Apple

The main advantage of trading using opposite United States and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.