Correlation Between Apollo Investment and Anglo American

Can any of the company-specific risk be diversified away by investing in both Apollo Investment and Anglo American 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 Apollo Investment and Anglo American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apollo Investment Corp and Anglo American plc, you can compare the effects of market volatilities on Apollo Investment and Anglo American 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 Apollo Investment with a short position of Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apollo Investment and Anglo American.

Diversification Opportunities for Apollo Investment and Anglo American

0.23

Correlation Coefficient

Apollo Investment  Anglo American

Modest diversification

The 3 months correlation between Apollo and Anglo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Investment Corp and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American plc and Apollo Investment 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 Apollo Investment Corp are associated (or correlated) with Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of Apollo Investment i.e., Apollo Investment and Anglo American go up and down completely randomly.

Pair Corralation between Apollo Investment and Anglo American

Assuming the 90 days trading horizon Apollo Investment is expected to generate 2.39 times less return on investment than Anglo American. But when comparing it to its historical volatility, Apollo Investment Corp is 2.76 times less risky than Anglo American. It trades about 0.14 of its potential returns per unit of risk. Anglo American plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,505  in Anglo American plc on September 3, 2024 and sell it today you would earn a total of  522.00  from holding Anglo American plc or generate 20.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apollo Investment Corp  vs.  Anglo American plc

Apollo Investment Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Investment Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Apollo Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Anglo American plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Anglo American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Investment and Anglo American

The main advantage of trading using opposite Apollo Investment and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apollo Investment position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American's long position.

The idea behind Apollo Investment Corp and Anglo American plc 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.