Correlation Between Ares Management and PT Indosat

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

Diversification Opportunities for Ares Management and PT Indosat

0.63

Correlation Coefficient

Ares Management  PT Indosat

Poor diversification

The 3 months correlation between Ares and IDO1 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat Tbk 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 PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of Ares Management i.e., Ares Management and PT Indosat go up and down completely randomly.

Pair Corralation between Ares Management and PT Indosat

Assuming the 90 days horizon Ares Management Corp is expected to under-perform the PT Indosat. But the stock apears to be less risky and, when comparing its historical volatility, Ares Management Corp is 7.18 times less risky than PT Indosat. The stock trades about -0.15 of its potential returns per unit of risk. The PT Indosat Tbk is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  13.00  in PT Indosat Tbk on December 25, 2024 and sell it today you would lose (7.50) from holding PT Indosat Tbk or give up 57.69% 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.  PT Indosat Tbk

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.

PT Indosat Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Indosat 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 PT Indosat

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

The idea behind Ares Management Corp and PT Indosat Tbk 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.