Correlation Between Apple and International Business

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

Diversification Opportunities for Apple and International Business

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Apple and International is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Apple i.e., Apple and International Business go up and down completely randomly.

Pair Corralation between Apple and International Business

Given the investment horizon of 90 days Apple Inc is expected to under-perform the International Business. In addition to that, Apple is 1.89 times more volatile than International Business Machines. It trades about -0.15 of its total potential returns per unit of risk. International Business Machines is currently generating about -0.15 per unit of volatility. If you would invest  12,672  in International Business Machines on July 5, 2022 and sell it today you would lose (521.00)  from holding International Business Machines or give up 4.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  International Business Machine

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

International Price Channel

Apple and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and International Business

The main advantage of trading using opposite Apple and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
Apple vs. Amazon Inc
The idea behind Apple Inc and International Business Machines 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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