Correlation Between Meritage Homes and Apple

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

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

Diversification Opportunities for Meritage Homes and Apple

-0.63

Correlation Coefficient

Meritage Homes  Apple

Excellent diversification

The 3 months correlation between Meritage and Apple is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Homes and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Meritage Homes 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 Meritage Homes 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 Meritage Homes i.e., Meritage Homes and Apple go up and down completely randomly.

Pair Corralation between Meritage Homes and Apple

Assuming the 90 days trading horizon Meritage Homes is expected to generate 1.23 times less return on investment than Apple. In addition to that, Meritage Homes is 1.66 times more volatile than Apple Inc. It trades about 0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.11 per unit of volatility. If you would invest  11,994  in Apple Inc on September 29, 2024 and sell it today you would earn a total of  12,521  from holding Apple Inc or generate 104.39% return on investment over 90 days.

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

Meritage Homes  vs.  Apple Inc

Meritage Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meritage Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 comparatively uncertain basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meritage Homes and Apple

The main advantage of trading using opposite Meritage Homes and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meritage Homes 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 Meritage Homes 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.