Correlation Between Apple and Etsy

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

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

Diversification Opportunities for Apple and Etsy

0.78

Correlation Coefficient

Apple  Etsy

Poor diversification

The 3 months correlation between Apple and Etsy is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Apple i.e., Apple and Etsy go up and down completely randomly.

Pair Corralation between Apple and Etsy

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.42 times more return on investment than Etsy. However, Apple Inc is 2.35 times less risky than Etsy. It trades about 0.24 of its potential returns per unit of risk. Etsy Inc is currently generating about 0.07 per unit of risk. If you would invest  20,501  in Apple Inc on September 22, 2024 and sell it today you would earn a total of  3,649  from holding Apple Inc or generate 17.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Apple Inc  vs.  Etsy Inc

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. Despite somewhat uncertain fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Etsy Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Etsy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Etsy

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

The idea behind Apple Inc and Etsy Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.