Correlation Between Apollo Global and Prospect Capital

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

Diversification Opportunities for Apollo Global and Prospect Capital

-0.39

Correlation Coefficient

Apollo Global  Prospect Capital

Very good diversification

The 3 months correlation between Apollo and Prospect is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Global Management and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital 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 Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of Apollo Global i.e., Apollo Global and Prospect Capital go up and down completely randomly.

Pair Corralation between Apollo Global and Prospect Capital

Assuming the 90 days trading horizon Apollo Global Management is expected to generate 1.02 times more return on investment than Prospect Capital. However, Apollo Global is 1.02 times more volatile than Prospect Capital. It trades about 0.14 of its potential returns per unit of risk. Prospect Capital is currently generating about 0.03 per unit of risk. If you would invest  6,426  in Apollo Global Management on September 23, 2024 and sell it today you would earn a total of  2,572  from holding Apollo Global Management or generate 40.02% return on investment over 90 days.

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

Apollo Global Management  vs.  Prospect Capital

Apollo Global Management

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Global Management are ranked lower than 17 (%) 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.

Prospect Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Apollo Global and Prospect Capital

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

The idea behind Apollo Global Management and Prospect Capital 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.