Correlation Between Apple and Shift4 Payments

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Can any of the company-specific risk be diversified away by investing in both Apple and Shift4 Payments 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 Apple and Shift4 Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Shift4 Payments, you can compare the effects of market volatilities on Apple and Shift4 Payments 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 Apple with a short position of Shift4 Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Shift4 Payments.

Diversification Opportunities for Apple and Shift4 Payments

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Apple and Shift4 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Shift4 Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shift4 Payments and Apple 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 Apple Inc are associated (or correlated) with Shift4 Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shift4 Payments has no effect on the direction of Apple i.e., Apple and Shift4 Payments go up and down completely randomly.

Pair Corralation between Apple and Shift4 Payments

Given the investment horizon of 90 days Apple is expected to generate 2.92 times less return on investment than Shift4 Payments. But when comparing it to its historical volatility, Apple Inc is 1.64 times less risky than Shift4 Payments. It trades about 0.05 of its potential returns per unit of risk. Shift4 Payments is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,399  in Shift4 Payments on September 2, 2022 and sell it today you would earn a total of  589.00  from holding Shift4 Payments or generate 13.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Shift4 Payments

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
0 of 100
Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Shift4 Payments 
Shift4 Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Shift4 Payments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Shift4 Payments reported solid returns over the last few months and may actually be approaching a breakup point.

Shift4 Price Channel

Apple and Shift4 Payments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Shift4 Payments

The main advantage of trading using opposite Apple and Shift4 Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Shift4 Payments 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 Shift4 Payments will offset losses from the drop in Shift4 Payments' long position.
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The idea behind Apple Inc and Shift4 Payments 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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