Correlation Between Apple and Endesa SA

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

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

Diversification Opportunities for Apple and Endesa SA

0.76

Correlation Coefficient

Apple  Endesa SA

Poor diversification

The 3 months correlation between Apple and Endesa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Endesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA 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 Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA has no effect on the direction of Apple i.e., Apple and Endesa SA go up and down completely randomly.

Pair Corralation between Apple and Endesa SA

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.76 times more return on investment than Endesa SA. However, Apple Inc is 1.32 times less risky than Endesa SA. It trades about 0.7 of its potential returns per unit of risk. Endesa SA is currently generating about -0.32 per unit of risk. If you would invest  22,815  in Apple Inc on October 1, 2024 and sell it today you would earn a total of  1,620  from holding Apple Inc or generate 7.1% 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.  Endesa SA

Apple Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Endesa SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Endesa SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Endesa SA

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

The idea behind Apple Inc and Endesa SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.