Correlation Between Apple and Gap
Can any of the company-specific risk be diversified away by investing in both Apple and Gap 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 Gap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and The Gap, you can compare the effects of market volatilities on Apple and Gap 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 Gap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Gap.
Diversification Opportunities for Apple and Gap
Almost no diversification
The 3 months correlation between Apple and Gap is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of Apple i.e., Apple and Gap go up and down completely randomly.
Pair Corralation between Apple and Gap
Assuming the 90 days trading horizon Apple is expected to generate 1.58 times less return on investment than Gap. But when comparing it to its historical volatility, Apple Inc is 2.4 times less risky than Gap. It trades about 0.1 of its potential returns per unit of risk. The Gap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 983.00 in The Gap on September 14, 2024 and sell it today you would earn a total of 1,339 from holding The Gap or generate 136.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Apple Inc vs. The Gap
Performance |
| Timeline |
| Apple Inc |
| Gap |
Apple and Gap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Gap
The main advantage of trading using opposite Apple and Gap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Gap 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 Gap will offset losses from the drop in Gap's long position.| Apple vs. Spirent Communications plc | Apple vs. Evolution Mining Limited | Apple vs. CHINA TELECOM H | Apple vs. Harmony Gold Mining |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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