Correlation Between Ares Acquisition and Park Ohio

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

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

Diversification Opportunities for Ares Acquisition and Park Ohio

-0.31

Correlation Coefficient

Ares Acquisition  Park Ohio

Very good diversification

The 3 months correlation between Ares and Park is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ares Acquisition and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Ares Acquisition i.e., Ares Acquisition and Park Ohio go up and down completely randomly.

Pair Corralation between Ares Acquisition and Park Ohio

Given the investment horizon of 90 days Ares Acquisition is expected to generate 0.05 times more return on investment than Park Ohio. However, Ares Acquisition is 21.18 times less risky than Park Ohio. It trades about 0.19 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about -0.45 per unit of risk. If you would invest  1,093  in Ares Acquisition on October 8, 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	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ares Acquisition  vs.  Park Ohio Holdings

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Park Ohio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Ohio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ares Acquisition and Park Ohio

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

The idea behind Ares Acquisition and Park Ohio Holdings 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.