Correlation Between Ares Management and Guangzhou Baiyunshan

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

Diversification Opportunities for Ares Management and Guangzhou Baiyunshan

0.66

Correlation Coefficient

Ares Management  Guangzhou Baiyunshan

Poor diversification

The 3 months correlation between Ares and Guangzhou is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan 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 Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of Ares Management i.e., Ares Management and Guangzhou Baiyunshan go up and down completely randomly.

Pair Corralation between Ares Management and Guangzhou Baiyunshan

Assuming the 90 days horizon Ares Management Corp is expected to generate 1.74 times more return on investment than Guangzhou Baiyunshan. However, Ares Management is 1.74 times more volatile than Guangzhou Baiyunshan Pharmaceutical. It trades about 0.09 of its potential returns per unit of risk. Guangzhou Baiyunshan Pharmaceutical is currently generating about 0.1 per unit of risk. If you would invest  16,618  in Ares Management Corp on October 6, 2024 and sell it today you would earn a total of  474.00  from holding Ares Management Corp or generate 2.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Ares Management Corp  vs.  Guangzhou Baiyunshan Pharmaceu

Ares Management Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 10 (%) 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.

Guangzhou Baiyunshan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Baiyunshan Pharmaceutical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Baiyunshan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ares Management and Guangzhou Baiyunshan

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

The idea behind Ares Management Corp and Guangzhou Baiyunshan Pharmaceutical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.