In a large saucepan, combine the apples, cranberries and water. Cook over medium heat until the berries pop, about 15 minutes. Reduce heat; simmer, uncovered, for 15 minutes or until apples are tender.
Stir in raisins, brown sugar, red-hots, cinnamon and nutmeg. Simmer, uncovered, for 5-10 minutes or until candies are dissolved. Serve warm or refrigerate until serving.