Correlation Between Apple and PERRIGO

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

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

Diversification Opportunities for Apple and PERRIGO

-0.49

Correlation Coefficient

Apple  PERRIGO

Very good diversification

The 3 months correlation between Apple and PERRIGO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and PERRIGO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PERRIGO 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 PERRIGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PERRIGO has no effect on the direction of Apple i.e., Apple and PERRIGO go up and down completely randomly.

Pair Corralation between Apple and PERRIGO

Assuming the 90 days trading horizon Apple is expected to generate 4.44 times less return on investment than PERRIGO. But when comparing it to its historical volatility, Apple Inc is 13.88 times less risky than PERRIGO. It trades about 0.1 of its potential returns per unit of risk. PERRIGO is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,638  in PERRIGO on September 23, 2024 and sell it today you would lose (2,571) from holding PERRIGO or give up 97.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Apple Inc  vs.  PERRIGO

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

PERRIGO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PERRIGO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PERRIGO is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and PERRIGO

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

The idea behind Apple Inc and PERRIGO 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.