Correlation Between Prospect Capital and Apollo Global

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

Diversification Opportunities for Prospect Capital and Apollo Global

-0.82

Correlation Coefficient

Prospect Capital  Apollo Global

Pay attention - limited upside

The 3 months correlation between Prospect and Apollo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Prospect 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 Prospect 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 Prospect 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 Prospect Capital i.e., Prospect Capital and Apollo Global go up and down completely randomly.

Pair Corralation between Prospect Capital and Apollo Global

Given the investment horizon of 90 days Prospect Capital is expected to under-perform the Apollo Global. But the stock apears to be less risky and, when comparing its historical volatility, Prospect Capital is 1.21 times less risky than Apollo Global. The stock trades about -0.03 of its potential returns per unit of risk. The Apollo Global Management is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,655  in Apollo Global Management on October 5, 2024 and sell it today you would earn a total of  9,931  from holding Apollo Global Management or generate 149.23% return on investment over 90 days.

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

Prospect Capital  vs.  Apollo Global Management

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. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Apollo Global Management

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Global Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Apollo Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prospect Capital and Apollo Global

The main advantage of trading using opposite Prospect Capital and Apollo Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect 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 Prospect 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .