ET Reddit Mentions | ChartExchange

The correlation regime between Apple and Microsoft entered a weakening trend on 14 Sep 16:00 ET at +0.53, and is **still ongoing** (22 candles · 88 trading hours). Over this period AAPL rose 2.05%, MSFT rose 0.24%. **The two stocks moved together.**
The composite correlation has come down from +0.53 (14 Sep) to **+0.415 now** (last data: 22 Sep 08:00 ET) the weakening regime, flagged, playing out
**READING — AAPL–MSFT at** MEDIUM × Weakening *(this stock own last 10)*: for this pair it has been **a durable decoupling (hedge / spread)** — **10** past runs, median **18 candles · 72 trading hours** (range 4–56), 7 lasted 2+ days. So the play has real, multi-day room before the turn the **ANTITHESIS** warns of.
**GAME PLAN:** Correlation is in a **Weakening regime** — the bond between the two pairs is loosening. This signals a shift into a **decoupling regime**: hedge and pair-trade (spread) strategies come to the fore, while one-way beta bets grow riskier.
**ANTITHESIS:** Risk: decoupling may be temporary; if correlation snaps back from the bottom, pair-trades backfire. Correlation is currently **0.10 points (19%) below** the period average — decoupling continues.
My Plan: The high correlation between the two stocks (0.53) has entered a downtrend. This signals that the co-movement between the two stocks is decoupling. As can also be seen on the chart, they have been diverging again since 21 Sep 08:00 ET. Looking at current conditions, I structured a Microsoft call option purchase and an Apple short position. While pricing Microsoft's potential upside via the call option, I aimed to turn the divergence between them into a hedge. As long as **MSFT keeps outperforming AAPL**, the trade stays alive; if they recouple and move together, the short offsets most of the call and losses stay cushioned.
For the correlation regime to shift from a downtrend to an uptrend:
a) if Apple and Microsoft start rising together (the MSFT call would profit while the AAPL short would lose — making it a failed hedge)
b) they could fall together, pushing the correlation between them into an uptrend (MSFT call loses, while the AAPL short fulfills its hedging role). In the game plan,
c) The divergence continues, but if Apple keeps rising while Microsoft remains flat or falls, the worst-case scenario for the game plan will come to pass.
(Looking at the 4-hour candlesticks and the individual charts for Apple and Microsoft, I think that if MSFT manages to hold above $507–$510, call options in particular will be profitable, and AAPL may pull back from its current level.)
In the good scenario, the correlation regime between them continues to decline — the two stocks decouple — MSFT continues to rise, and AAPL stays flat / declines.
On a reclaim of 508 I'd buy the **MSFT Oct 23 510 call** (\~0.42Δ, \~$10.5, IV \~26.5% — low for MSFT, no earnings in the expiry, theta \~$0.25/day) and delta-match it with a short in AAPL, so it's the MSFT–AAPL spread I'm long, not either stock's direction.
*Methodology: Four-hour candle closes are used while the markets for both instruments are open (08:00, 12:00, 16:00, 20:00 ET).*
*The correlation coefficient is a composite score derived not only from the Pearson method but also from Pearson, Spearman, and EWMA calculations.*

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