Correlation Between Apple and Crocs

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

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

Diversification Opportunities for Apple and Crocs

-0.84

Correlation Coefficient

Apple  Crocs

Pay attention - limited upside

The 3 months correlation between Apple and Crocs is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Crocs Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crocs Inc 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 Crocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crocs Inc has no effect on the direction of Apple i.e., Apple and Crocs go up and down completely randomly.

Pair Corralation between Apple and Crocs

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.75 times more return on investment than Crocs. However, Apple Inc is 1.34 times less risky than Crocs. It trades about 0.05 of its potential returns per unit of risk. Crocs Inc is currently generating about -0.43 per unit of risk. If you would invest  15,686  in Apple Inc on January 29, 2024 and sell it today you would earn a total of  188.00  from holding Apple Inc or generate 1.2% return on investment over 90 days.

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

Apple Inc  vs.  Crocs Inc

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Crocs Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crocs Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Crocs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Crocs

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

The idea behind Apple Inc and Crocs 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.