Correlation Between BZAM and Apple

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

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

Diversification Opportunities for BZAM and Apple

-0.41

Correlation Coefficient

BZAM  Apple

Very good diversification

The 3 months correlation between BZAM and Apple is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BZAM and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and BZAM 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 BZAM are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of BZAM i.e., BZAM and Apple go up and down completely randomly.

Pair Corralation between BZAM and Apple

Assuming the 90 days horizon BZAM is expected to generate 165.89 times more return on investment than Apple. However, BZAM is 165.89 times more volatile than Apple Inc. It trades about 0.12 of its potential returns per unit of risk. Apple Inc is currently generating about 0.12 per unit of risk. If you would invest  1.90  in BZAM on September 19, 2024 and sell it today you would lose (1.90) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

BZAM  vs.  Apple Inc

BZAM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BZAM and Apple

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

The idea behind BZAM and Apple 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.