Correlation Between Ares Management and Highlight Communications

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

Diversification Opportunities for Ares Management and Highlight Communications

0.69

Correlation Coefficient

Ares Management  Highlight Communications

Poor diversification

The 3 months correlation between Ares and Highlight is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of Ares Management i.e., Ares Management and Highlight Communications go up and down completely randomly.

Pair Corralation between Ares Management and Highlight Communications

Assuming the 90 days horizon Ares Management Corp is expected to under-perform the Highlight Communications. But the stock apears to be less risky and, when comparing its historical volatility, Ares Management Corp is 2.64 times less risky than Highlight Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Highlight Communications AG is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Highlight Communications AG on December 4, 2024 and sell it today you would lose (4.00) from holding Highlight Communications AG or give up 3.42% of portfolio value over 90 days.

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

Ares Management Corp  vs.  Highlight Communications AG

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 nearly stable basic indicators, Ares Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Highlight Communications

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Highlight Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ares Management and Highlight Communications

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

The idea behind Ares Management Corp and Highlight Communications AG 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.