Correlation Between Ares Management and Natura Co

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

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

Diversification Opportunities for Ares Management and Natura Co

-0.68

Correlation Coefficient

Ares Management  Natura Co

Excellent diversification

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

Pair Corralation between Ares Management and Natura Co

Assuming the 90 days trading horizon Ares Management is expected to generate 0.6 times more return on investment than Natura Co. However, Ares Management is 1.67 times less risky than Natura Co. It trades about 0.29 of its potential returns per unit of risk. Natura Co Holding is currently generating about -0.11 per unit of risk. If you would invest  9,306  in Ares Management on October 6, 2024 and sell it today you would earn a total of  1,884  from holding Ares Management or generate 20.25% 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.  Natura Co Holding

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.

Natura Co Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ares Management and Natura Co

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

The idea behind Ares Management and Natura Co Holding 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.