Correlation Between Apple and ECCW

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

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

Diversification Opportunities for Apple and ECCW

-0.64

Correlation Coefficient

Apple  ECCW

Excellent diversification

The 3 months correlation between Apple and ECCW is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and ECCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECCW 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 ECCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECCW has no effect on the direction of Apple i.e., Apple and ECCW go up and down completely randomly.

Pair Corralation between Apple and ECCW

Given the investment horizon of 90 days Apple Inc is expected to generate 2.23 times more return on investment than ECCW. However, Apple is 2.23 times more volatile than ECCW. It trades about 0.03 of its potential returns per unit of risk. ECCW is currently generating about 0.03 per unit of risk. If you would invest  14,116  in Apple Inc on February 1, 2024 and sell it today you would earn a total of  2,917  from holding Apple Inc or generate 20.66% return on investment over 90 days.

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

Apple Inc  vs.  ECCW

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

ECCW

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECCW are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, ECCW is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Apple and ECCW

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

The idea behind Apple Inc and ECCW 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.