Correlation Between Apple and Bonterra Energy

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

By analyzing existing cross correlation between Apple Inc CDR and Bonterra Energy Corp, you can compare the effects of market volatilities on Apple and Bonterra Energy 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 Bonterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Bonterra Energy.

Diversification Opportunities for Apple and Bonterra Energy

-0.87

Correlation Coefficient

Apple  Bonterra Energy

Pay attention - limited upside

The 3 months correlation between Apple and Bonterra is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Bonterra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra Energy Corp 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 CDR are associated (or correlated) with Bonterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Energy Corp has no effect on the direction of Apple i.e., Apple and Bonterra Energy go up and down completely randomly.

Pair Corralation between Apple and Bonterra Energy

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.9 times more return on investment than Bonterra Energy. However, Apple Inc CDR is 1.11 times less risky than Bonterra Energy. It trades about 0.18 of its potential returns per unit of risk. Bonterra Energy Corp is currently generating about -0.44 per unit of risk. If you would invest  2,514  in Apple Inc CDR on February 5, 2024 and sell it today you would earn a total of  192.00  from holding Apple Inc CDR or generate 7.64% return on investment over 90 days.

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

Apple Inc CDR  vs.  Bonterra Energy Corp

Apple Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Apple is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bonterra Energy Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bonterra Energy Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Bonterra Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Bonterra Energy

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

The idea behind Apple Inc CDR and Bonterra Energy Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.