Correlation Between Apple and North American

Can any of the company-specific risk be diversified away by investing in both Apple and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Apple and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and North American.

Diversification Opportunities for Apple and North American

0.65

Correlation Coefficient

Apple  North American

Poor diversification

The 3 months correlation between Apple and North is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Apple i.e., Apple and North American go up and down completely randomly.

Pair Corralation between Apple and North American

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 5.06 times more return on investment than North American. However, Apple is 5.06 times more volatile than North American Financial. It trades about 0.18 of its potential returns per unit of risk. North American Financial is currently generating about 0.52 per unit of risk. If you would invest  3,338  in Apple Inc CDR on September 26, 2024 and sell it today you would earn a total of  443.00  from holding Apple Inc CDR or generate 13.27% return on investment over 90 days.

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

Apple Inc CDR  vs.  North American Financial

Apple Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

North American Financial

Risk-Adjusted Performance

40 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and North American

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

The idea behind Apple Inc CDR and North American Financial 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 Global Correlations module to find global opportunities by holding instruments from different markets.