Correlation Between Ares Commercial and Arlington Asset

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

By analyzing existing cross correlation between Ares Commercial Real and Arlington Asset Investment, you can compare the effects of market volatilities on Ares Commercial and Arlington Asset 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 Commercial with a short position of Arlington Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Commercial and Arlington Asset.

Diversification Opportunities for Ares Commercial and Arlington Asset

0.0

Correlation Coefficient

Ares Commercial  Arlington Asset

Pay attention - limited upside

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

Pair Corralation between Ares Commercial and Arlington Asset

If you would invest (100.00) in Arlington Asset Investment on December 2, 2024 and sell it today you would earn a total of  100.00  from holding Arlington Asset Investment or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ares Commercial Real  vs.  Arlington Asset Investment

Ares Commercial Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Arlington Asset Inve

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arlington Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Arlington Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ares Commercial and Arlington Asset

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

The idea behind Ares Commercial Real and Arlington Asset Investment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.