Over the last few months, Apple (NASDAQ:
) has -- to put it lightly -- been disappointing to those with
$1000 price targets. Along with it, the NASDAQ 100 has not been in
a similar slump. But recently, the technology market has broken its
correlation with Apple.
The NASDAQ 100 ETF (NYSE:
) once had a near near one-to-one correlation with Apple.
(A correlation coefficient quantifies the severity of a
relationship. A figure above zero indicates a positive
relationship, while a negative figure describes an inverse
QQQ and AAPL had a near 0.91 correlation coefficient from
mid-August until December. This relationship started to fade after
December 3, 2012. The QQQ stood strong in the face of a
It is an interesting exercise to see how Apple's competition
faired during this decline.
One can create a hypothetical "anti-Apple" index. An index
composed of Research in Motion (NASDAQ:
), Dell (NASDAQ:
), Amazon (NASDAQ:
), Hewlett-Packard (NYSE:
), and Microsoft (NASDAQ:
). Each at a 20 percent weight.
From mid-September of 2012 until November of 2012, Apple and
this concocted Anti-Apple index both sold off in similar stride.
This time period was when Apple fell from $700 to $536. Apple fell
26 percent and the Anti-Apple index fell 15 percent, but this
correlation was short lived.
Both found a similar short-term bottom on November 16 2012, but
this is where it gets interesting.
After a 'dead cat bounce' the two started to diverge. The chart
below displays this. Apple started to fall and Apple's competition
started to rally. Apple is down 18 percent and the Anti-Apple index
is up roughly 11 percent from the top of the each "dead cat
The action after the bounce of the September/November sell-off
can be explained a few ways.
This divergence could be a function of portfolio and risk
management. Most long-term investors in Apple have great gains and
these profits could have been shifted around in order to protect
and preserve capital.
Diversifying away from Apple and into other technology is one
way to do this. The valuations of firms that compete with Apple
seem low, because they have been dominated by Apple. This may be
the new norm, for technology may soon become another low margin
commodity business with low PE multiples.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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