Correlation Between Apollo Commercial and TPG RE
Can any of the company-specific risk be diversified away by investing in both Apollo Commercial and TPG RE 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 Commercial and TPG RE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apollo Commercial Real and TPG RE Finance, you can compare the effects of market volatilities on Apollo Commercial and TPG RE 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 Commercial with a short position of TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apollo Commercial and TPG RE.
Diversification Opportunities for Apollo Commercial and TPG RE
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Apollo and TPG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Commercial Real and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance and Apollo Commercial 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 Commercial Real are associated (or correlated) with TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of Apollo Commercial i.e., Apollo Commercial and TPG RE go up and down completely randomly.
Pair Corralation between Apollo Commercial and TPG RE
Considering the 90-day investment horizon Apollo Commercial is expected to generate 1.04 times less return on investment than TPG RE. But when comparing it to its historical volatility, Apollo Commercial Real is 1.02 times less risky than TPG RE. It trades about 0.2 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 881.00 in TPG RE Finance on August 31, 2024 and sell it today you would earn a total of 39.00 from holding TPG RE Finance or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apollo Commercial Real vs. TPG RE Finance
Performance |
| Timeline |
| Apollo Commercial Real |
| TPG RE Finance |
Apollo Commercial and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apollo Commercial and TPG RE
The main advantage of trading using opposite Apollo Commercial and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apollo Commercial position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE's long position.| Apollo Commercial vs. Ellington Financial | Apollo Commercial vs. Dynex Capital | Apollo Commercial vs. Orchid Island Capital | Apollo Commercial vs. Chimera Investment |
| TPG RE vs. Ellington Residential Mortgage | TPG RE vs. Ares Commercial Real | TPG RE vs. Nexpoint Real Estate | TPG RE vs. Ellington Financial |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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