Correlation Between Apple and CPU SOFTWAREHOUSE

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

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

Diversification Opportunities for Apple and CPU SOFTWAREHOUSE

-0.5

Correlation Coefficient

Apple  CPU SOFTWAREHOUSE

Very good diversification

The 3 months correlation between Apple and CPU is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of Apple i.e., Apple and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between Apple and CPU SOFTWAREHOUSE

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.12 times more return on investment than CPU SOFTWAREHOUSE. However, Apple Inc is 8.19 times less risky than CPU SOFTWAREHOUSE. It trades about 0.55 of its potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about 0.02 per unit of risk. If you would invest  21,575  in Apple Inc on September 21, 2024 and sell it today you would earn a total of  2,265  from holding Apple Inc or generate 10.5% return on investment over 90 days.

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

Apple Inc  vs.  CPU SOFTWAREHOUSE

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Apple and CPU SOFTWAREHOUSE

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

The idea behind Apple Inc and CPU SOFTWAREHOUSE 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.