Correlation Between Apollo Power and Aviation Links

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

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

Diversification Opportunities for Apollo Power and Aviation Links

-0.54

Correlation Coefficient

Apollo Power  Aviation Links

Excellent diversification

The 3 months correlation between Apollo and Aviation is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Power and Aviation Links in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviation Links and Apollo Power 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 Power are associated (or correlated) with Aviation Links. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviation Links has no effect on the direction of Apollo Power i.e., Apollo Power and Aviation Links go up and down completely randomly.

Pair Corralation between Apollo Power and Aviation Links

Assuming the 90 days trading horizon Apollo Power is expected to under-perform the Aviation Links. In addition to that, Apollo Power is 1.78 times more volatile than Aviation Links. It trades about -0.08 of its total potential returns per unit of risk. Aviation Links is currently generating about 0.06 per unit of volatility. If you would invest  98,715  in Aviation Links on September 26, 2024 and sell it today you would earn a total of  66,085  from holding Aviation Links or generate 66.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.74%
Values	Daily Returns

Apollo Power  vs.  Aviation Links

Apollo Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aviation Links

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aviation Links are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aviation Links sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Power and Aviation Links

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

The idea behind Apollo Power and Aviation Links 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.