Correlation Between Ares AcquisitionII and AltEnergy Acquisition

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

By analyzing existing cross correlation between Ares Acquisition and AltEnergy Acquisition Corp, you can compare the effects of market volatilities on Ares AcquisitionII and AltEnergy Acquisition 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 AcquisitionII with a short position of AltEnergy Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares AcquisitionII and AltEnergy Acquisition.

Diversification Opportunities for Ares AcquisitionII and AltEnergy Acquisition

-0.29

Correlation Coefficient

Ares AcquisitionII  AltEnergy Acquisition

Very good diversification

The 3 months correlation between Ares and AltEnergy is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ares Acquisition and AltEnergy Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltEnergy Acquisition and Ares AcquisitionII 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 Acquisition are associated (or correlated) with AltEnergy Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltEnergy Acquisition has no effect on the direction of Ares AcquisitionII i.e., Ares AcquisitionII and AltEnergy Acquisition go up and down completely randomly.

Pair Corralation between Ares AcquisitionII and AltEnergy Acquisition

Assuming the 90 days trading horizon Ares AcquisitionII is expected to generate 1140.72 times less return on investment than AltEnergy Acquisition. But when comparing it to its historical volatility, Ares Acquisition is 425.4 times less risky than AltEnergy Acquisition. It trades about 0.07 of its potential returns per unit of risk. AltEnergy Acquisition Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3.55  in AltEnergy Acquisition Corp on October 24, 2024 and sell it today you would lose (3.44) from holding AltEnergy Acquisition Corp or give up 96.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.49%
Values	Daily Returns

Ares Acquisition  vs.  AltEnergy Acquisition Corp

Ares AcquisitionII

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares AcquisitionII is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

AltEnergy Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AltEnergy Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ares AcquisitionII and AltEnergy Acquisition

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

The idea behind Ares Acquisition and AltEnergy Acquisition Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.