Correlation Between Apple and Alsea SAB

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

By analyzing existing cross correlation between Apple Inc and Alsea SAB de, you can compare the effects of market volatilities on Apple and Alsea SAB 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 Alsea SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Alsea SAB.

Diversification Opportunities for Apple and Alsea SAB

-0.58

Correlation Coefficient

Apple  Alsea SAB

Excellent diversification

The 3 months correlation between Apple and Alsea is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de 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 Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of Apple i.e., Apple and Alsea SAB go up and down completely randomly.

Pair Corralation between Apple and Alsea SAB

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.93 times more return on investment than Alsea SAB. However, Apple Inc is 1.07 times less risky than Alsea SAB. It trades about 0.08 of its potential returns per unit of risk. Alsea SAB de is currently generating about -0.19 per unit of risk. If you would invest  453,494  in Apple Inc on September 1, 2024 and sell it today you would earn a total of  31,506  from holding Apple Inc or generate 6.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Alsea SAB de

Apple Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Apple and Alsea SAB

The main advantage of trading using opposite Apple and Alsea SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Alsea SAB 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 Alsea SAB will offset losses from the drop in Alsea SAB's long position.

The idea behind Apple Inc and Alsea SAB de 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.