Correlation Between Applovin Corp and African Discovery

Can any of the company-specific risk be diversified away by investing in both Applovin Corp and African Discovery 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 Applovin Corp and African Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applovin Corp and African Discovery Group, you can compare the effects of market volatilities on Applovin Corp and African Discovery 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 Applovin Corp with a short position of African Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applovin Corp and African Discovery.

Diversification Opportunities for Applovin Corp and African Discovery

0.29

Correlation Coefficient

Applovin Corp  African Discovery

Modest diversification

The 3 months correlation between Applovin and African is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Applovin Corp and African Discovery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Discovery and Applovin Corp 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 Applovin Corp are associated (or correlated) with African Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Discovery has no effect on the direction of Applovin Corp i.e., Applovin Corp and African Discovery go up and down completely randomly.

Pair Corralation between Applovin Corp and African Discovery

Considering the 90-day investment horizon Applovin Corp is expected to generate 25.64 times less return on investment than African Discovery. But when comparing it to its historical volatility, Applovin Corp is 2.39 times less risky than African Discovery. It trades about 0.01 of its potential returns per unit of risk. African Discovery Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.40  in African Discovery Group on December 2, 2024 and sell it today you would earn a total of  0.50  from holding African Discovery Group or generate 125.0% return on investment over 90 days.

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

Applovin Corp  vs.  African Discovery Group

Applovin Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applovin Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Applovin Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

African Discovery

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in African Discovery Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, African Discovery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applovin Corp and African Discovery

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

The idea behind Applovin Corp and African Discovery Group 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.