Correlation Between Ares Management and H-FARM SPA

Can any of the company-specific risk be diversified away by investing in both Ares Management and H-FARM SPA 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 Ares Management and H-FARM SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ares Management Corp and H FARM SPA, you can compare the effects of market volatilities on Ares Management and H-FARM SPA 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 Ares Management with a short position of H-FARM SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and H-FARM SPA.

Diversification Opportunities for Ares Management and H-FARM SPA

0.03

Correlation Coefficient

Ares Management  H-FARM SPA

Significant diversification

The 3 months correlation between Ares and H-FARM is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and H FARM SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H FARM SPA and Ares Management 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 Ares Management Corp are associated (or correlated) with H-FARM SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H FARM SPA has no effect on the direction of Ares Management i.e., Ares Management and H-FARM SPA go up and down completely randomly.

Pair Corralation between Ares Management and H-FARM SPA

Assuming the 90 days horizon Ares Management Corp is expected to under-perform the H-FARM SPA. But the stock apears to be less risky and, when comparing its historical volatility, Ares Management Corp is 3.74 times less risky than H-FARM SPA. The stock trades about -0.15 of its potential returns per unit of risk. The H FARM SPA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12.00  in H FARM SPA on December 26, 2024 and sell it today you would earn a total of  1.00  from holding H FARM SPA or generate 8.33% return on investment over 90 days.

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

Ares Management Corp  vs.  H FARM SPA

Ares Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

H FARM SPA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in H FARM SPA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, H-FARM SPA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and H-FARM SPA

The main advantage of trading using opposite Ares Management and H-FARM SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, H-FARM SPA 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 H-FARM SPA will offset losses from the drop in H-FARM SPA's long position.

The idea behind Ares Management Corp and H FARM SPA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.