Correlation Between Apple and DECKERS OUTDOOR

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

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

Diversification Opportunities for Apple and DECKERS OUTDOOR

-0.12

Correlation Coefficient

Apple  DECKERS OUTDOOR

Good diversification

The 3 months correlation between Apple and DECKERS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and DECKERS OUTDOOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DECKERS OUTDOOR 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 DECKERS OUTDOOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DECKERS OUTDOOR has no effect on the direction of Apple i.e., Apple and DECKERS OUTDOOR go up and down completely randomly.

Pair Corralation between Apple and DECKERS OUTDOOR

Assuming the 90 days trading horizon Apple is expected to generate 1.8 times less return on investment than DECKERS OUTDOOR. But when comparing it to its historical volatility, Apple Inc is 2.14 times less risky than DECKERS OUTDOOR. It trades about 0.26 of its potential returns per unit of risk. DECKERS OUTDOOR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  13,885  in DECKERS OUTDOOR on September 17, 2024 and sell it today you would earn a total of  5,690  from holding DECKERS OUTDOOR or generate 40.98% return on investment over 90 days.

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

Apple Inc  vs.  DECKERS OUTDOOR

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

DECKERS OUTDOOR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DECKERS OUTDOOR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DECKERS OUTDOOR unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and DECKERS OUTDOOR

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

The idea behind Apple Inc and DECKERS OUTDOOR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.