Correlation Between Apollo Investment and TELECOM ITALIA

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

Diversification Opportunities for Apollo Investment and TELECOM ITALIA

0.16

Correlation Coefficient

Apollo Investment  TELECOM ITALIA

Average diversification

The 3 months correlation between Apollo and TELECOM is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Investment Corp and TELECOM ITALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALIA 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 TELECOM ITALIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM ITALIA has no effect on the direction of Apollo Investment i.e., Apollo Investment and TELECOM ITALIA go up and down completely randomly.

Pair Corralation between Apollo Investment and TELECOM ITALIA

Assuming the 90 days trading horizon Apollo Investment Corp is expected to under-perform the TELECOM ITALIA. But the stock apears to be less risky and, when comparing its historical volatility, Apollo Investment Corp is 2.14 times less risky than TELECOM ITALIA. The stock trades about -0.06 of its potential returns per unit of risk. The TELECOM ITALIA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  24.00  in TELECOM ITALIA on December 22, 2024 and sell it today you would earn a total of  5.00  from holding TELECOM ITALIA or generate 20.83% return on investment over 90 days.

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

Apollo Investment Corp  vs.  TELECOM ITALIA

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

TELECOM ITALIA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TELECOM ITALIA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TELECOM ITALIA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Investment and TELECOM ITALIA

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

The idea behind Apollo Investment Corp and TELECOM ITALIA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.