Correlation Between Apollo Global and Cleveland Cliffs

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

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

Diversification Opportunities for Apollo Global and Cleveland Cliffs

0.8

Correlation Coefficient

Apollo Global  Cleveland Cliffs

Very poor diversification

The 3 months correlation between Apollo and Cleveland is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Global Management and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Apollo Global 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 Global Management are associated (or correlated) with Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of Apollo Global i.e., Apollo Global and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Apollo Global and Cleveland Cliffs

Considering the 90-day investment horizon Apollo Global Management is expected to under-perform the Cleveland Cliffs. But the stock apears to be less risky and, when comparing its historical volatility, Apollo Global Management is 1.02 times less risky than Cleveland Cliffs. The stock trades about -0.06 of its potential returns per unit of risk. The Cleveland Cliffs is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,007  in Cleveland Cliffs on January 17, 2024 and sell it today you would earn a total of  117.00  from holding Cleveland Cliffs or generate 5.83% return on investment over 90 days.

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

Apollo Global Management  vs.  Cleveland Cliffs

Apollo Global Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Global Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Apollo Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Cleveland Cliffs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cleveland Cliffs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Cleveland Cliffs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Global and Cleveland Cliffs

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

The idea behind Apollo Global Management and Cleveland Cliffs 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.