Correlation Between Starwood Property and Apollo Commercial

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

By analyzing existing cross correlation between Starwood Property Trust and Apollo Commercial Real, you can compare the effects of market volatilities on Starwood Property and Apollo Commercial 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 Starwood Property with a short position of Apollo Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starwood Property and Apollo Commercial.

Diversification Opportunities for Starwood Property and Apollo Commercial

0.89

Correlation Coefficient

Starwood Property  Apollo Commercial

Very poor diversification

The 3 months correlation between Starwood and Apollo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Starwood Property Trust and Apollo Commercial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Commercial Real and Starwood Property 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 Starwood Property Trust are associated (or correlated) with Apollo Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Commercial Real has no effect on the direction of Starwood Property i.e., Starwood Property and Apollo Commercial go up and down completely randomly.

Pair Corralation between Starwood Property and Apollo Commercial

Given the investment horizon of 90 days Starwood Property is expected to generate 2.01 times less return on investment than Apollo Commercial. But when comparing it to its historical volatility, Starwood Property Trust is 1.6 times less risky than Apollo Commercial. It trades about 0.09 of its potential returns per unit of risk. Apollo Commercial Real is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  880.00  in Apollo Commercial Real on December 26, 2024 and sell it today you would earn a total of  106.00  from holding Apollo Commercial Real or generate 12.05% return on investment over 90 days.

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

Starwood Property Trust  vs.  Apollo Commercial Real

Starwood Property Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Starwood Property Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Starwood Property may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Apollo Commercial Real

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Commercial Real are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Apollo Commercial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Starwood Property and Apollo Commercial

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

The idea behind Starwood Property Trust and Apollo Commercial Real 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.