Correlation Between Ares Management and ASM International

Can any of the company-specific risk be diversified away by investing in both Ares Management and ASM International 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 ASM International 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 ASM International NV, you can compare the effects of market volatilities on Ares Management and ASM International 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 ASM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and ASM International.

Diversification Opportunities for Ares Management and ASM International

0.39

Correlation Coefficient

Ares Management  ASM International

Weak diversification

The 3 months correlation between Ares and ASM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Ares Management i.e., Ares Management and ASM International go up and down completely randomly.

Pair Corralation between Ares Management and ASM International

Assuming the 90 days horizon Ares Management Corp is expected to generate 1.12 times more return on investment than ASM International. However, Ares Management is 1.12 times more volatile than ASM International NV. It trades about 0.14 of its potential returns per unit of risk. ASM International NV is currently generating about 0.15 per unit of risk. If you would invest  15,715  in Ares Management Corp on October 26, 2024 and sell it today you would earn a total of  3,087  from holding Ares Management Corp or generate 19.64% return on investment over 90 days.

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

Ares Management Corp  vs.  ASM International NV

Ares Management Corp

Risk-Adjusted Performance

11 of 100

OK

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

ASM International

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Ares Management and ASM International

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

The idea behind Ares Management Corp and ASM International NV 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.