Correlation Between Apple and Target

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

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

Diversification Opportunities for Apple and Target

-0.92

Correlation Coefficient

Apple  Target

Pay attention - limited upside

The 3 months correlation between Apple and Target is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Apple 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 Apple Inc are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Apple i.e., Apple and Target go up and down completely randomly.

Pair Corralation between Apple and Target

Given the investment horizon of 90 days Apple Inc is expected to generate 1.3 times more return on investment than Target. However, Apple is 1.3 times more volatile than Target. It trades about -0.01 of its potential returns per unit of risk. Target is currently generating about -0.18 per unit of risk. If you would invest  16,971  in Apple Inc on January 26, 2024 and sell it today you would lose (69.00) from holding Apple Inc or give up 0.41% of portfolio value over 90 days.

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

Apple Inc  vs.  Target

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Target

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Target

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

The idea behind Apple Inc and Target 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.