Correlation Between Stem and Apple

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

Diversification Opportunities for Stem and Apple

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Stem and Apple is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Stem 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 Stem Inc 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 Stem i.e., Stem and Apple go up and down completely randomly.

Pair Corralation between Stem and Apple

Given the investment horizon of 90 days Stem Inc is expected to generate 3.41 times more return on investment than Apple. However, Stem is 3.41 times more volatile than Apple Inc. It trades about 0.02 of its potential returns per unit of risk. Apple Inc is currently generating about 0.05 per unit of risk. If you would invest  970.00  in Stem Inc on April 7, 2022 and sell it today you would lose (213.00)  from holding Stem Inc or give up 21.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy88.31%
ValuesDaily Returns

Stem Inc  vs.  Apple Inc

 Performance (%) 
      Timeline 
Stem Inc 
Stem Performance
0 of 100
Over the last 90 days Stem Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in August 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Stem Price Channel

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 weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in August 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0066
Payout Ratio
0.14
Last Split Factor
4:1
Forward Annual Dividend Rate
0.92
Dividend Date
2022-05-12
Ex Dividend Date
2022-05-06
Last Split Date
2020-08-31

Apple Price Channel

Stem and Apple Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Stem and Apple

The main advantage of trading using opposite Stem and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem 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 Stem Inc 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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