Correlation Between Apollo Global and Modine Manufacturing

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

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

Diversification Opportunities for Apollo Global and Modine Manufacturing

0.08

Correlation Coefficient

Apollo Global  Modine Manufacturing

Significant diversification

The 3 months correlation between Apollo and Modine is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Global Management and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Apollo Global 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 Global Management are associated (or correlated) with Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of Apollo Global i.e., Apollo Global and Modine Manufacturing go up and down completely randomly.

Pair Corralation between Apollo Global and Modine Manufacturing

Assuming the 90 days trading horizon Apollo Global Management is expected to generate 0.59 times more return on investment than Modine Manufacturing. However, Apollo Global Management is 1.7 times less risky than Modine Manufacturing. It trades about -0.04 of its potential returns per unit of risk. Modine Manufacturing is currently generating about -0.09 per unit of risk. If you would invest  9,037  in Apollo Global Management on October 9, 2024 and sell it today you would lose (133.00) from holding Apollo Global Management or give up 1.47% of portfolio value over 90 days.

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

Apollo Global Management  vs.  Modine Manufacturing

Apollo Global Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Global Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apollo Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Modine Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modine Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Modine Manufacturing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Apollo Global and Modine Manufacturing

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

The idea behind Apollo Global Management and Modine Manufacturing 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.