Correlation Between Apple and Xiaomi Corp

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

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

Diversification Opportunities for Apple and Xiaomi Corp

0.59

Correlation Coefficient

Apple  Xiaomi Corp

Very weak diversification

The 3 months correlation between Apple and Xiaomi is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Xiaomi Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi Corp ADR 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 Xiaomi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi Corp ADR has no effect on the direction of Apple i.e., Apple and Xiaomi Corp go up and down completely randomly.

Pair Corralation between Apple and Xiaomi Corp

Given the investment horizon of 90 days Apple Inc is expected to generate 0.18 times more return on investment than Xiaomi Corp. However, Apple Inc is 5.46 times less risky than Xiaomi Corp. It trades about 0.86 of its potential returns per unit of risk. Xiaomi Corp ADR is currently generating about 0.04 per unit of risk. If you would invest  22,802  in Apple Inc on September 19, 2024 and sell it today you would earn a total of  2,546  from holding Apple Inc or generate 11.17% return on investment over 90 days.

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

Apple Inc  vs.  Xiaomi Corp ADR

Apple Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xiaomi Corp ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Xiaomi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Xiaomi Corp

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

The idea behind Apple Inc and Xiaomi Corp ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.