Correlation Between Apple and International Business

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

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

Diversification Opportunities for Apple and International Business

0.78

Correlation Coefficient

Apple  International Business

Poor diversification

The 3 months correlation between Apple and International is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc DRC and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 DRC are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Apple i.e., Apple and International Business go up and down completely randomly.

Pair Corralation between Apple and International Business

Assuming the 90 days trading horizon Apple Inc DRC is expected to generate 1.07 times more return on investment than International Business. However, Apple is 1.07 times more volatile than International Business Machines. It trades about 0.17 of its potential returns per unit of risk. International Business Machines is currently generating about -0.28 per unit of risk. If you would invest  910,700  in Apple Inc DRC on February 3, 2024 and sell it today you would earn a total of  58,350  from holding Apple Inc DRC or generate 6.41% return on investment over 90 days.

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

Apple Inc DRC  vs.  International Business Machine

Apple Inc DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Apple and International Business

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

The idea behind Apple Inc DRC and International Business Machines 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.