Correlation Between Apple and Cummins

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

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

Diversification Opportunities for Apple and Cummins

-0.73

Correlation Coefficient

Apple  Cummins

Pay attention - limited upside

The 3 months correlation between Apple and Cummins is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Apple i.e., Apple and Cummins go up and down completely randomly.

Pair Corralation between Apple and Cummins

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.08 times more return on investment than Cummins. However, Apple is 1.08 times more volatile than Cummins. It trades about 0.14 of its potential returns per unit of risk. Cummins is currently generating about 0.09 per unit of risk. If you would invest  15,668  in Apple Inc on February 4, 2024 and sell it today you would earn a total of  1,482  from holding Apple Inc or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Apple Inc  vs.  Cummins

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 comparatively stable fundamental indicators, Apple is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cummins

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Cummins exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Cummins

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

The idea behind Apple Inc and Cummins 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 Anywhere module to track or share privately all of your investments from the convenience of any device.