Correlation Between IBERDROLA ADR/1 and Apollo Investment

Can any of the company-specific risk be diversified away by investing in both IBERDROLA ADR/1 and Apollo Investment 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 IBERDROLA ADR/1 and Apollo Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IBERDROLA ADR1 EO and Apollo Investment Corp, you can compare the effects of market volatilities on IBERDROLA ADR/1 and Apollo Investment 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 IBERDROLA ADR/1 with a short position of Apollo Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBERDROLA ADR/1 and Apollo Investment.

Diversification Opportunities for IBERDROLA ADR/1 and Apollo Investment

-0.54

Correlation Coefficient

IBERDROLA ADR/1  Apollo Investment

Excellent diversification

The 3 months correlation between IBERDROLA and Apollo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding IBERDROLA ADR1 EO and Apollo Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Investment Corp and IBERDROLA ADR/1 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 IBERDROLA ADR1 EO are associated (or correlated) with Apollo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Investment Corp has no effect on the direction of IBERDROLA ADR/1 i.e., IBERDROLA ADR/1 and Apollo Investment go up and down completely randomly.

Pair Corralation between IBERDROLA ADR/1 and Apollo Investment

Assuming the 90 days trading horizon IBERDROLA ADR/1 is expected to generate 1.19 times less return on investment than Apollo Investment. In addition to that, IBERDROLA ADR/1 is 1.19 times more volatile than Apollo Investment Corp. It trades about 0.05 of its total potential returns per unit of risk. Apollo Investment Corp is currently generating about 0.07 per unit of volatility. If you would invest  867.00  in Apollo Investment Corp on October 5, 2024 and sell it today you would earn a total of  427.00  from holding Apollo Investment Corp or generate 49.25% return on investment over 90 days.

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

IBERDROLA ADR1 EO  vs.  Apollo Investment Corp

IBERDROLA ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IBERDROLA ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IBERDROLA ADR/1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Apollo Investment Corp

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Apollo Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Apollo Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IBERDROLA ADR/1 and Apollo Investment

The main advantage of trading using opposite IBERDROLA ADR/1 and Apollo Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBERDROLA ADR/1 position performs unexpectedly, Apollo Investment 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 Investment will offset losses from the drop in Apollo Investment's long position.

The idea behind IBERDROLA ADR1 EO and Apollo Investment Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.