Correlation Between Apple and CyberAgent

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

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

Diversification Opportunities for Apple and CyberAgent

0.74

Correlation Coefficient

Apple  CyberAgent

Poor diversification

The 3 months correlation between Apple and CyberAgent is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CyberAgent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberAgent 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 CyberAgent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberAgent has no effect on the direction of Apple i.e., Apple and CyberAgent go up and down completely randomly.

Pair Corralation between Apple and CyberAgent

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.68 times more return on investment than CyberAgent. However, Apple Inc is 1.47 times less risky than CyberAgent. It trades about 0.23 of its potential returns per unit of risk. CyberAgent is currently generating about 0.04 per unit of risk. If you would invest  20,450  in Apple Inc on September 27, 2024 and sell it today you would earn a total of  4,060  from holding Apple Inc or generate 19.85% return on investment over 90 days.

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

Apple Inc  vs.  CyberAgent

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

CyberAgent

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CyberAgent are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CyberAgent is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and CyberAgent

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

The idea behind Apple Inc and CyberAgent 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.