Correlation Between Apollo Investment and Nestl SA

Can any of the company-specific risk be diversified away by investing in both Apollo Investment and Nestl SA 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 Nestl SA 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 Nestl SA, you can compare the effects of market volatilities on Apollo Investment and Nestl SA 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 Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apollo Investment and Nestl SA.

Diversification Opportunities for Apollo Investment and Nestl SA

-0.28

Correlation Coefficient

Apollo Investment  Nestl SA

Very good diversification

The 3 months correlation between Apollo and Nestl is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Investment Corp and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA 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 Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of Apollo Investment i.e., Apollo Investment and Nestl SA go up and down completely randomly.

Pair Corralation between Apollo Investment and Nestl SA

Assuming the 90 days trading horizon Apollo Investment Corp is expected to under-perform the Nestl SA. But the stock apears to be less risky and, when comparing its historical volatility, Apollo Investment Corp is 1.27 times less risky than Nestl SA. The stock trades about -0.06 of its potential returns per unit of risk. The Nestl SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,960  in Nestl SA on December 22, 2024 and sell it today you would earn a total of  1,500  from holding Nestl SA or generate 18.84% return on investment over 90 days.

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

Apollo Investment Corp  vs.  Nestl SA

Apollo Investment Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apollo Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Apollo Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nestl SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nestl SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Nestl SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Investment and Nestl SA

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

The idea behind Apollo Investment Corp and Nestl SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.