Correlation Between Apple and Overactive Media

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

Diversification Opportunities for Apple and Overactive Media

0.29

Correlation Coefficient

Apple  Overactive Media

Modest diversification

The 3 months correlation between Apple and Overactive is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Overactive Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overactive Media Corp 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 Overactive Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overactive Media Corp has no effect on the direction of Apple i.e., Apple and Overactive Media go up and down completely randomly.

Pair Corralation between Apple and Overactive Media

Assuming the 90 days trading horizon Apple is expected to generate 1.05 times less return on investment than Overactive Media. But when comparing it to its historical volatility, Apple Inc CDR is 3.74 times less risky than Overactive Media. It trades about 0.18 of its potential returns per unit of risk. Overactive Media Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Overactive Media Corp on September 26, 2024 and sell it today you would earn a total of  2.00  from holding Overactive Media Corp or generate 8.33% 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.  Overactive Media Corp

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.

Overactive Media Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Overactive Media Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Overactive Media showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Overactive Media

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

The idea behind Apple Inc CDR and Overactive Media Corp 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 the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .