Correlation Between Ares Management and Peel Mining

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

Diversification Opportunities for Ares Management and Peel Mining

0.5

Correlation Coefficient

Ares Management  Peel Mining

Very weak diversification

The 3 months correlation between Ares and Peel is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Peel Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining Limited 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining Limited has no effect on the direction of Ares Management i.e., Ares Management and Peel Mining go up and down completely randomly.

Pair Corralation between Ares Management and Peel Mining

Assuming the 90 days horizon Ares Management Corp is expected to generate 0.5 times more return on investment than Peel Mining. However, Ares Management Corp is 2.0 times less risky than Peel Mining. It trades about 0.15 of its potential returns per unit of risk. Peel Mining Limited is currently generating about 0.07 per unit of risk. If you would invest  14,316  in Ares Management Corp on October 10, 2024 and sell it today you would earn a total of  3,186  from holding Ares Management Corp or generate 22.25% return on investment over 90 days.

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

Ares Management Corp  vs.  Peel Mining Limited

Ares Management Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 12 (%) 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.

Peel Mining Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peel Mining Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Peel Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and Peel Mining

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

The idea behind Ares Management Corp and Peel Mining Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.