Correlation Between Ares Management and Bank of New York Mellon

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

Diversification Opportunities for Ares Management and Bank of New York Mellon

0.4

Correlation Coefficient

Ares Management  Bank of New York Mellon

Very weak diversification

The 3 months correlation between Ares and Bank is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York Mellon 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 Bank of New York Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York Mellon has no effect on the direction of Ares Management i.e., Ares Management and Bank of New York Mellon go up and down completely randomly.

Pair Corralation between Ares Management and Bank of New York Mellon

Assuming the 90 days horizon Ares Management Corp is expected to under-perform the Bank of New York Mellon. In addition to that, Ares Management is 1.48 times more volatile than The Bank of. It trades about -0.15 of its total potential returns per unit of risk. The Bank of is currently generating about 0.05 per unit of volatility. If you would invest  7,509  in The Bank of on December 26, 2024 and sell it today you would earn a total of  307.00  from holding The Bank of or generate 4.09% return on investment over 90 days.

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

Ares Management Corp  vs.  The Bank of

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.

Bank of New York Mellon

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bank of New York Mellon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ares Management and Bank of New York Mellon

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

The idea behind Ares Management Corp and The Bank of 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.