Correlation Between Apple and United Parcel

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Can any of the company-specific risk be diversified away by investing in both Apple and United Parcel 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 United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and United Parcel Service, you can compare the effects of market volatilities on Apple and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and United Parcel.

Diversification Opportunities for Apple and United Parcel

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Apple and United is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Apple i.e., Apple and United Parcel go up and down completely randomly.

Pair Corralation between Apple and United Parcel

Given the investment horizon of 90 days Apple Inc is expected to generate 0.67 times more return on investment than United Parcel. However, Apple Inc is 1.48 times less risky than United Parcel. It trades about 0.01 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.0 per unit of risk. If you would invest  17,330  in Apple Inc on December 29, 2023 and sell it today you would earn a total of  1.00  from holding Apple Inc or generate 0.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  United Parcel Service

 Performance 
       Timeline  
Apple Inc 

Risk-Adjusted Performance

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Low
 
High
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 unfluctuating 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.
United Parcel Service 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Apple and United Parcel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and United Parcel

The main advantage of trading using opposite Apple and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.
The idea behind Apple Inc and United Parcel Service 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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