Correlation Between Apple and Intel
Can any of the company-specific risk be diversified away by investing in both Apple and Intel 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 Intel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Intel, you can compare the effects of market volatilities on Apple and Intel 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 Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Intel.
Diversification Opportunities for Apple and Intel
Poor diversification
The 3 months correlation between Apple and Intel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Apple i.e., Apple and Intel go up and down completely randomly.
Pair Corralation between Apple and Intel
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.51 times more return on investment than Intel. However, Apple Inc is 1.94 times less risky than Intel. It trades about 0.08 of its potential returns per unit of risk. Intel is currently generating about 0.01 per unit of risk. If you would invest 13,263 in Apple Inc on August 28, 2024 and sell it today you would earn a total of 8,822 from holding Apple Inc or generate 66.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Intel
Performance |
| Timeline |
| Apple Inc |
| Intel |
Apple and Intel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Intel
The main advantage of trading using opposite Apple and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.The idea behind Apple Inc and Intel 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.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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