Correlation Between Ares Management and LESTE FDO

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

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

Diversification Opportunities for Ares Management and LESTE FDO

-0.74

Correlation Coefficient

Ares Management  LESTE FDO

Pay attention - limited upside

The 3 months correlation between Ares and LESTE is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and LESTE FDO INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LESTE FDO INV 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 LESTE FDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LESTE FDO INV has no effect on the direction of Ares Management i.e., Ares Management and LESTE FDO go up and down completely randomly.

Pair Corralation between Ares Management and LESTE FDO

Assuming the 90 days trading horizon Ares Management is expected to under-perform the LESTE FDO. In addition to that, Ares Management is 1.63 times more volatile than LESTE FDO INV. It trades about -0.19 of its total potential returns per unit of risk. LESTE FDO INV is currently generating about 0.21 per unit of volatility. If you would invest  6,159  in LESTE FDO INV on December 23, 2024 and sell it today you would earn a total of  1,091  from holding LESTE FDO INV or generate 17.71% 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.  LESTE FDO INV

Ares Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LESTE FDO INV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LESTE FDO INV are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, LESTE FDO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and LESTE FDO

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

The idea behind Ares Management and LESTE FDO INV 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.