Correlation Between Western Investment and Apple

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

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

Diversification Opportunities for Western Investment and Apple

0.62

Correlation Coefficient

Western Investment  Apple

Poor diversification

The 3 months correlation between Western and Apple is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment 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 Western Investment 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 Western Investment 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 Western Investment i.e., Western Investment and Apple go up and down completely randomly.

Pair Corralation between Western Investment and Apple

Given the investment horizon of 90 days Western Investment is expected to generate 5.57 times more return on investment than Apple. However, Western Investment is 5.57 times more volatile than Apple Inc CDR. It trades about 0.24 of its potential returns per unit of risk. Apple Inc CDR is currently generating about 0.55 per unit of risk. If you would invest  42.00  in Western Investment on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Western Investment or generate 26.19% return on investment over 90 days.

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

Western Investment  vs.  Apple Inc CDR

Western Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating 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 Western Investment and Apple

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

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 Transaction History module to view history of all your transactions and understand their impact on performance.