Correlation Between Apple and Life Storage

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

Diversification Opportunities for Apple and Life Storage

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Apple and Life Storage is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Life Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Storage 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 Life Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Storage has no effect on the direction of Apple i.e., Apple and Life Storage go up and down completely randomly.

Pair Corralation between Apple and Life Storage

Given the investment horizon of 90 days Apple Inc is expected to generate 1.43 times more return on investment than Life Storage. However, Apple is 1.43 times more volatile than Life Storage. It trades about -0.26 of its potential returns per unit of risk. Life Storage is currently generating about -0.45 per unit of risk. If you would invest  15,796  in Apple Inc on July 3, 2022 and sell it today you would lose (1,976)  from holding Apple Inc or give up 12.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Life Storage

 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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Life Storage 
Life Storage Performance
0 of 100
Over the last 90 days Life Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Life Storage is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Life Storage Price Channel

Apple and Life Storage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Life Storage

The main advantage of trading using opposite Apple and Life Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Life Storage 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 Life Storage will offset losses from the drop in Life Storage's long position.
Apple vs. Amazon Inc
The idea behind Apple Inc and Life Storage 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.
Life Storage vs. JP Morgan Chase
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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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