Correlation Between Apollo Medical and RELIANCE STEEL

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

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

Diversification Opportunities for Apollo Medical and RELIANCE STEEL

0.75

Correlation Coefficient

Apollo Medical  RELIANCE STEEL

Poor diversification

The 3 months correlation between Apollo and RELIANCE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Medical Holdings and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL and Apollo Medical 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 Medical Holdings are associated (or correlated) with RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of Apollo Medical i.e., Apollo Medical and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between Apollo Medical and RELIANCE STEEL

Assuming the 90 days horizon Apollo Medical is expected to generate 1.51 times less return on investment than RELIANCE STEEL. But when comparing it to its historical volatility, Apollo Medical Holdings is 1.24 times less risky than RELIANCE STEEL. It trades about 0.13 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  25,756  in RELIANCE STEEL AL on September 3, 2024 and sell it today you would earn a total of  4,684  from holding RELIANCE STEEL AL or generate 18.19% return on investment over 90 days.

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

Apollo Medical Holdings  vs.  RELIANCE STEEL AL

Apollo Medical Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Medical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Apollo Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RELIANCE STEEL AL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RELIANCE STEEL AL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, RELIANCE STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Medical and RELIANCE STEEL

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

The idea behind Apollo Medical Holdings and RELIANCE STEEL AL 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.