Correlation Between Apple and CASTA DIVA

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

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

Diversification Opportunities for Apple and CASTA DIVA

0.39

Correlation Coefficient

Apple  CASTA DIVA

Weak diversification

The 3 months correlation between Apple and CASTA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CASTA DIVA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CASTA DIVA GROUP 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 CASTA DIVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CASTA DIVA GROUP has no effect on the direction of Apple i.e., Apple and CASTA DIVA go up and down completely randomly.

Pair Corralation between Apple and CASTA DIVA

Assuming the 90 days trading horizon Apple is expected to generate 1.02 times less return on investment than CASTA DIVA. But when comparing it to its historical volatility, Apple Inc is 2.33 times less risky than CASTA DIVA. It trades about 0.25 of its potential returns per unit of risk. CASTA DIVA GROUP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  98.00  in CASTA DIVA GROUP on September 16, 2024 and sell it today you would earn a total of  19.00  from holding CASTA DIVA GROUP or generate 19.39% 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  vs.  CASTA DIVA GROUP

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

CASTA DIVA GROUP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CASTA DIVA GROUP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CASTA DIVA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and CASTA DIVA

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

The idea behind Apple Inc and CASTA DIVA GROUP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.