Correlation Between Ares Management and Fator Verit

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

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

Diversification Opportunities for Ares Management and Fator Verit

-0.75

Correlation Coefficient

Ares Management  Fator Verit

Pay attention - limited upside

The 3 months correlation between Ares and Fator is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and Fator Verit Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fator Verit 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 Fator Verit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fator Verit Fundo has no effect on the direction of Ares Management i.e., Ares Management and Fator Verit go up and down completely randomly.

Pair Corralation between Ares Management and Fator Verit

Assuming the 90 days trading horizon Ares Management is expected to generate 3.58 times less return on investment than Fator Verit. But when comparing it to its historical volatility, Ares Management is 1.08 times less risky than Fator Verit. It trades about 0.07 of its potential returns per unit of risk. Fator Verit Fundo is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  7,258  in Fator Verit Fundo on October 9, 2024 and sell it today you would earn a total of  559.00  from holding Fator Verit Fundo or generate 7.7% 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.  Fator Verit Fundo

Ares Management

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management are ranked lower than 18 (%) 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.

Fator Verit Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fator Verit Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Fator Verit 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 Fator Verit

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

The idea behind Ares Management and Fator Verit 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..