Correlation Between Restaurant Brands and Apple

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

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

Diversification Opportunities for Restaurant Brands and Apple

0.72

Correlation Coefficient

Restaurant Brands  Apple

Poor diversification

The 3 months correlation between Restaurant and Apple is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa 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 Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Apple go up and down completely randomly.

Pair Corralation between Restaurant Brands and Apple

Assuming the 90 days trading horizon Restaurant Brands is expected to generate 1.72 times less return on investment than Apple. But when comparing it to its historical volatility, Restaurant Brands International is 1.04 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 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,269  in Apple Inc CDR on September 13, 2024 and sell it today you would earn a total of  343.00  from holding Apple Inc CDR or generate 10.49% return on investment over 90 days.

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

Restaurant Brands Internationa  vs.  Apple Inc CDR

Restaurant Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Restaurant Brands International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Restaurant Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Apple Inc CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 10 (%) 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 Restaurant Brands and Apple

The main advantage of trading using opposite Restaurant Brands and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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 Restaurant Brands International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.