Correlation Between Plaza Retail and Apple

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

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

Diversification Opportunities for Plaza Retail and Apple

-0.71

Correlation Coefficient

Plaza Retail  Apple

Pay attention - limited upside

The 3 months correlation between Plaza and Apple is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR and Plaza Retail 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 Plaza Retail REIT 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 CDR has no effect on the direction of Plaza Retail i.e., Plaza Retail and Apple go up and down completely randomly.

Pair Corralation between Plaza Retail and Apple

Assuming the 90 days trading horizon Plaza Retail is expected to generate 2.37 times less return on investment than Apple. But when comparing it to its historical volatility, Plaza Retail REIT is 1.64 times less risky than Apple. It trades about 0.08 of its potential returns per unit of risk. Apple Inc CDR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,152  in Apple Inc CDR on September 25, 2024 and sell it today you would earn a total of  586.00  from holding Apple Inc CDR or generate 18.59% return on investment over 90 days.

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

Plaza Retail REIT  vs.  Apple Inc CDR

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Apple Inc CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Plaza Retail and Apple

The main advantage of trading using opposite Plaza Retail and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plaza Retail 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 Plaza Retail REIT and Apple Inc CDR 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.