Correlation Between Apple and Floor Decor

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

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

Diversification Opportunities for Apple and Floor Decor

-0.67

Correlation Coefficient

Apple  Floor Decor

Excellent diversification

The 3 months correlation between Apple and Floor is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings 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 Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of Apple i.e., Apple and Floor Decor go up and down completely randomly.

Pair Corralation between Apple and Floor Decor

Given the investment horizon of 90 days Apple Inc is expected to under-perform the Floor Decor. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.88 times less risky than Floor Decor. The stock trades about -0.06 of its potential returns per unit of risk. The Floor Decor Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  11,395  in Floor Decor Holdings on January 24, 2024 and sell it today you would lose (544.00) from holding Floor Decor Holdings or give up 4.77% of portfolio value over 90 days.

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

Apple Inc  vs.  Floor Decor Holdings

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Floor Decor Holdings

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Floor Decor Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Floor Decor is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Apple and Floor Decor

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

The idea behind Apple Inc and Floor Decor Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.