Correlation Between Ares AcquisitionII and YHN Acquisition

Can any of the company-specific risk be diversified away by investing in both Ares AcquisitionII and YHN 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 YHN 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 YHN Acquisition I, you can compare the effects of market volatilities on Ares AcquisitionII and YHN 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 YHN Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares AcquisitionII and YHN Acquisition.

Diversification Opportunities for Ares AcquisitionII and YHN Acquisition

0.02

Correlation Coefficient

Ares AcquisitionII  YHN Acquisition

Significant diversification

The 3 months correlation between Ares and YHN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ares Acquisition and YHN Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YHN Acquisition I 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 YHN Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YHN Acquisition I has no effect on the direction of Ares AcquisitionII i.e., Ares AcquisitionII and YHN Acquisition go up and down completely randomly.

Pair Corralation between Ares AcquisitionII and YHN Acquisition

Assuming the 90 days trading horizon Ares Acquisition is expected to generate 1.08 times more return on investment than YHN Acquisition. However, Ares AcquisitionII is 1.08 times more volatile than YHN Acquisition I. It trades about 0.06 of its potential returns per unit of risk. YHN Acquisition I is currently generating about 0.04 per unit of risk. If you would invest  1,086  in Ares Acquisition on October 3, 2024 and sell it today you would earn a total of  23.00  from holding Ares Acquisition or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ares Acquisition  vs.  YHN Acquisition I

Ares AcquisitionII

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 4 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

YHN Acquisition I

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YHN Acquisition I are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, YHN Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ares AcquisitionII and YHN Acquisition

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

The idea behind Ares Acquisition and YHN Acquisition I 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 Global Correlations module to find global opportunities by holding instruments from different markets.