Correlation Between Ares Management and Nippon Telegraph

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

Diversification Opportunities for Ares Management and Nippon Telegraph

0.36

Correlation Coefficient

Ares Management  Nippon Telegraph

Weak diversification

The 3 months correlation between Ares and Nippon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Nippon Telegraph and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph 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 Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph has no effect on the direction of Ares Management i.e., Ares Management and Nippon Telegraph go up and down completely randomly.

Pair Corralation between Ares Management and Nippon Telegraph

Assuming the 90 days horizon Ares Management is expected to generate 1.69 times less return on investment than Nippon Telegraph. In addition to that, Ares Management is 1.64 times more volatile than Nippon Telegraph and. It trades about 0.11 of its total potential returns per unit of risk. Nippon Telegraph and is currently generating about 0.32 per unit of volatility. If you would invest  2,280  in Nippon Telegraph and on September 12, 2024 and sell it today you would earn a total of  160.00  from holding Nippon Telegraph and or generate 7.02% 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.  Nippon Telegraph and

Ares Management Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 16 (%) 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.

Nippon Telegraph

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Telegraph and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nippon Telegraph 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 Nippon Telegraph

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

The idea behind Ares Management Corp and Nippon Telegraph and 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.