Correlation Between Ares Management and Metalurgica Gerdau

Can any of the company-specific risk be diversified away by investing in both Ares Management and Metalurgica Gerdau 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 Metalurgica Gerdau into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ares Management and Metalurgica Gerdau SA, you can compare the effects of market volatilities on Ares Management and Metalurgica Gerdau 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 Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Metalurgica Gerdau.

Diversification Opportunities for Ares Management and Metalurgica Gerdau

0.43

Correlation Coefficient

Ares Management  Metalurgica Gerdau

Very weak diversification

The 3 months correlation between Ares and Metalurgica is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau 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 are associated (or correlated) with Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Ares Management i.e., Ares Management and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Ares Management and Metalurgica Gerdau

Assuming the 90 days trading horizon Ares Management is expected to generate 0.88 times more return on investment than Metalurgica Gerdau. However, Ares Management is 1.14 times less risky than Metalurgica Gerdau. It trades about 0.25 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.07 per unit of risk. If you would invest  8,746  in Ares Management on October 6, 2024 and sell it today you would earn a total of  2,444  from holding Ares Management or generate 27.94% return on investment over 90 days.

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

Ares Management  vs.  Metalurgica Gerdau SA

Ares Management

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ares Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Metalurgica Gerdau

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ares Management and Metalurgica Gerdau

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

The idea behind Ares Management and Metalurgica Gerdau SA 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 Valuation module to check real value of public entities based on technical and fundamental data.