Correlation Between Apollo Power and Clal Insurance

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Can any of the company-specific risk be diversified away by investing in both Apollo Power and Clal Insurance 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 Apollo Power and Clal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apollo Power and Clal Insurance Enterprises, you can compare the effects of market volatilities on Apollo Power and Clal Insurance 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 Apollo Power with a short position of Clal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apollo Power and Clal Insurance.

Diversification Opportunities for Apollo Power and Clal Insurance

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Apollo and Clal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Power and Clal Insurance Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clal Insurance Enter and Apollo Power 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 Apollo Power are associated (or correlated) with Clal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clal Insurance Enter has no effect on the direction of Apollo Power i.e., Apollo Power and Clal Insurance go up and down completely randomly.

Pair Corralation between Apollo Power and Clal Insurance

Assuming the 90 days trading horizon Apollo Power is expected to generate 5.23 times more return on investment than Clal Insurance. However, Apollo Power is 5.23 times more volatile than Clal Insurance Enterprises. It trades about 0.12 of its potential returns per unit of risk. Clal Insurance Enterprises is currently generating about 0.23 per unit of risk. If you would invest  60,460  in Apollo Power on December 29, 2023 and sell it today you would earn a total of  6,310  from holding Apollo Power or generate 10.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Apollo Power  vs.  Clal Insurance Enterprises

 Performance 
       Timeline  
Apollo Power 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Apollo Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Apollo Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Clal Insurance Enter 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Clal Insurance Enterprises are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Apollo Power and Clal Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apollo Power and Clal Insurance

The main advantage of trading using opposite Apollo Power and Clal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apollo Power position performs unexpectedly, Clal Insurance 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 Clal Insurance will offset losses from the drop in Clal Insurance's long position.
The idea behind Apollo Power and Clal Insurance Enterprises 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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