Correlation Between Ares Capital and Apollo Global

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

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

Diversification Opportunities for Ares Capital and Apollo Global

0.84

Correlation Coefficient

Ares Capital  Apollo Global

Very poor diversification

The 3 months correlation between Ares and Apollo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Apollo Global Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Global Management and Ares Capital 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 Ares Capital are associated (or correlated) with Apollo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Global Management has no effect on the direction of Ares Capital i.e., Ares Capital and Apollo Global go up and down completely randomly.

Pair Corralation between Ares Capital and Apollo Global

Given the investment horizon of 90 days Ares Capital is expected to generate 3.21 times less return on investment than Apollo Global. But when comparing it to its historical volatility, Ares Capital is 2.18 times less risky than Apollo Global. It trades about 0.08 of its potential returns per unit of risk. Apollo Global Management is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,050  in Apollo Global Management on September 23, 2024 and sell it today you would earn a total of  11,053  from holding Apollo Global Management or generate 182.69% return on investment over 90 days.

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

Ares Capital  vs.  Apollo Global Management

Ares Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ares Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Apollo Global Management

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Global Management are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Apollo Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Capital and Apollo Global

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

The idea behind Ares Capital and Apollo Global Management 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.