Correlation Between Ares Management and Caltagirone SpA

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

Diversification Opportunities for Ares Management and Caltagirone SpA

0.78

Correlation Coefficient

Ares Management  Caltagirone SpA

Poor diversification

The 3 months correlation between Ares and Caltagirone is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Caltagirone SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caltagirone SpA 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 Caltagirone SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caltagirone SpA has no effect on the direction of Ares Management i.e., Ares Management and Caltagirone SpA go up and down completely randomly.

Pair Corralation between Ares Management and Caltagirone SpA

Assuming the 90 days horizon Ares Management Corp is expected to generate 0.87 times more return on investment than Caltagirone SpA. However, Ares Management Corp is 1.15 times less risky than Caltagirone SpA. It trades about 0.12 of its potential returns per unit of risk. Caltagirone SpA is currently generating about 0.08 per unit of risk. If you would invest  6,031  in Ares Management Corp on September 20, 2024 and sell it today you would earn a total of  10,831  from holding Ares Management Corp or generate 179.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Ares Management Corp  vs.  Caltagirone SpA

Ares Management Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 11 (%) 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.

Caltagirone SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caltagirone SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caltagirone SpA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ares Management and Caltagirone SpA

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

The idea behind Ares Management Corp and Caltagirone SpA 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.