Correlation Between Ares Acquisition and Luxfer Holdings

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

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

Diversification Opportunities for Ares Acquisition and Luxfer Holdings

0.0

Correlation Coefficient

Ares Acquisition  Luxfer Holdings

Pay attention - limited upside

The 3 months correlation between Ares and Luxfer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ares Acquisition and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Ares Acquisition 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 Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Ares Acquisition i.e., Ares Acquisition and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Ares Acquisition and Luxfer Holdings

Given the investment horizon of 90 days Ares Acquisition is expected to generate 0.06 times more return on investment than Luxfer Holdings. However, Ares Acquisition is 17.9 times less risky than Luxfer Holdings. It trades about 0.19 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about -0.24 per unit of risk. If you would invest  1,093  in Ares Acquisition on October 6, 2024 and sell it today you would earn a total of  4.00  from holding Ares Acquisition or generate 0.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ares Acquisition  vs.  Luxfer Holdings PLC

Ares Acquisition

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ares Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Luxfer Holdings PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Luxfer Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ares Acquisition and Luxfer Holdings

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

The idea behind Ares Acquisition and Luxfer Holdings PLC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.