Correlation Between Ares Management and UMC Electronics

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

Diversification Opportunities for Ares Management and UMC Electronics

-0.46

Correlation Coefficient

Ares Management  UMC Electronics

Very good diversification

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

Pair Corralation between Ares Management and UMC Electronics

Assuming the 90 days horizon Ares Management Corp is expected to under-perform the UMC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Ares Management Corp is 1.13 times less risky than UMC Electronics. The stock trades about -0.13 of its potential returns per unit of risk. The UMC Electronics Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  172.00  in UMC Electronics Co on December 19, 2024 and sell it today you would earn a total of  19.00  from holding UMC Electronics Co or generate 11.05% 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.  UMC Electronics Co

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 unsteady 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.

UMC Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UMC Electronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, UMC Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and UMC Electronics

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

The idea behind Ares Management Corp and UMC Electronics Co 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.