Correlation Between Apple and Enthusiast Gaming

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

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

Diversification Opportunities for Apple and Enthusiast Gaming

0.27

Correlation Coefficient

Apple  Enthusiast Gaming

Modest diversification

The 3 months correlation between Apple and Enthusiast is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Enthusiast Gaming Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enthusiast Gaming 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 CDR are associated (or correlated) with Enthusiast Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enthusiast Gaming has no effect on the direction of Apple i.e., Apple and Enthusiast Gaming go up and down completely randomly.

Pair Corralation between Apple and Enthusiast Gaming

Assuming the 90 days trading horizon Apple is expected to generate 1.55 times less return on investment than Enthusiast Gaming. But when comparing it to its historical volatility, Apple Inc CDR is 4.6 times less risky than Enthusiast Gaming. It trades about 0.13 of its potential returns per unit of risk. Enthusiast Gaming Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Enthusiast Gaming Holdings on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Enthusiast Gaming Holdings or generate 6.67% return on investment over 90 days.

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

Apple Inc CDR  vs.  Enthusiast Gaming Holdings

Apple Inc CDR

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enthusiast Gaming

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enthusiast Gaming Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Enthusiast Gaming displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Enthusiast Gaming

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

The idea behind Apple Inc CDR and Enthusiast Gaming Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.