Correlation Between Apple and GEA GROUP

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

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

Diversification Opportunities for Apple and GEA GROUP

0.84

Correlation Coefficient

Apple  GEA GROUP

Very poor diversification

The 3 months correlation between Apple and GEA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and GEA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEA 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 GEA GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEA GROUP has no effect on the direction of Apple i.e., Apple and GEA GROUP go up and down completely randomly.

Pair Corralation between Apple and GEA GROUP

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.25 times more return on investment than GEA GROUP. However, Apple is 1.25 times more volatile than GEA GROUP. It trades about 0.25 of its potential returns per unit of risk. GEA GROUP is currently generating about 0.17 per unit of risk. If you would invest  20,720  in Apple Inc on September 28, 2024 and sell it today you would earn a total of  3,735  from holding Apple Inc or generate 18.03% return on investment over 90 days.

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

Apple Inc  vs.  GEA 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 very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

GEA GROUP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEA GROUP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GEA GROUP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and GEA GROUP

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

The idea behind Apple Inc and GEA 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.