Correlation Between Key Tronic and Apple

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

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

Diversification Opportunities for Key Tronic and Apple

-0.86

Correlation Coefficient

Key Tronic  Apple

Pay attention - limited upside

The 3 months correlation between Key and Apple is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Key Tronic 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 Key Tronic 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 has no effect on the direction of Key Tronic i.e., Key Tronic and Apple go up and down completely randomly.

Pair Corralation between Key Tronic and Apple

Given the investment horizon of 90 days Key Tronic is expected to generate 1.86 times less return on investment than Apple. In addition to that, Key Tronic is 2.07 times more volatile than Apple Inc. It trades about 0.03 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.11 per unit of volatility. If you would invest  21,626  in Apple Inc on September 29, 2024 and sell it today you would earn a total of  3,933  from holding Apple Inc or generate 18.19% return on investment over 90 days.

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

Key Tronic  vs.  Apple Inc

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Apple Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Key Tronic and Apple

The main advantage of trading using opposite Key Tronic and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Key Tronic 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 Key Tronic and Apple Inc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.