Correlation Between Ares Management and TreeHouse Foods

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

Diversification Opportunities for Ares Management and TreeHouse Foods

-0.46

Correlation Coefficient

Ares Management  TreeHouse Foods

Very good diversification

The 3 months correlation between Ares and TreeHouse is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods 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 TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of Ares Management i.e., Ares Management and TreeHouse Foods go up and down completely randomly.

Pair Corralation between Ares Management and TreeHouse Foods

Assuming the 90 days horizon Ares Management Corp is expected to generate 0.84 times more return on investment than TreeHouse Foods. However, Ares Management Corp is 1.18 times less risky than TreeHouse Foods. It trades about 0.12 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.03 per unit of risk. If you would invest  8,420  in Ares Management Corp on October 22, 2024 and sell it today you would earn a total of  10,080  from holding Ares Management Corp or generate 119.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ares Management Corp  vs.  TreeHouse Foods

Ares Management Corp

Risk-Adjusted Performance

11 of 100

OK

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 uncertain basic indicators, Ares Management reported solid returns over the last few months and may actually be approaching a breakup point.

TreeHouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Ares Management Corp and TreeHouse Foods 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 Commodity Directory module to find actively traded commodities issued by global exchanges.