Correlation Between Ares Management and Kinea Securities

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

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

Diversification Opportunities for Ares Management and Kinea Securities

-0.68

Correlation Coefficient

Ares Management  Kinea Securities

Excellent diversification

The 3 months correlation between Ares and Kinea is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and Kinea Securities Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinea Securities Fundo 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 Kinea Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinea Securities Fundo has no effect on the direction of Ares Management i.e., Ares Management and Kinea Securities go up and down completely randomly.

Pair Corralation between Ares Management and Kinea Securities

Assuming the 90 days trading horizon Ares Management is expected to generate 1.16 times more return on investment than Kinea Securities. However, Ares Management is 1.16 times more volatile than Kinea Securities Fundo. It trades about 0.24 of its potential returns per unit of risk. Kinea Securities Fundo is currently generating about 0.0 per unit of risk. If you would invest  8,782  in Ares Management on October 10, 2024 and sell it today you would earn a total of  2,336  from holding Ares Management or generate 26.6% return on investment over 90 days.

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

Ares Management  vs.  Kinea Securities Fundo

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.

Kinea Securities Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinea Securities Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Kinea Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ares Management and Kinea Securities

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

The idea behind Ares Management and Kinea Securities Fundo 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.