Correlation Between Apple and Adobe Systems

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

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

Diversification Opportunities for Apple and Adobe Systems

0.82

Correlation Coefficient

Apple  Adobe Systems

Very poor diversification

The 3 months correlation between Apple and Adobe is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Adobe Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems rporated 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 Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems rporated has no effect on the direction of Apple i.e., Apple and Adobe Systems go up and down completely randomly.

Pair Corralation between Apple and Adobe Systems

Given the investment horizon of 90 days Apple Inc is expected to generate 1.55 times more return on investment than Adobe Systems. However, Apple is 1.55 times more volatile than Adobe Systems Incorporated. It trades about -0.01 of its potential returns per unit of risk. Adobe Systems Incorporated is currently generating about -0.39 per unit of risk. If you would invest  17,372  in Apple Inc on January 17, 2024 and sell it today you would lose (103.00) from holding Apple Inc or give up 0.59% of portfolio value over 90 days.

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

Apple Inc  vs.  Adobe Systems Incorporated

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. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Adobe Systems rporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Apple and Adobe Systems

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

The idea behind Apple Inc and Adobe Systems Incorporated 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.