Correlation Between Ares Commercial and AJX Old

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

Diversification Opportunities for Ares Commercial and AJX Old

0.28

Correlation Coefficient

Ares Commercial  AJX Old

Modest diversification

The 3 months correlation between Ares and AJX is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real and AJX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJX Old 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 AJX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJX Old has no effect on the direction of Ares Commercial i.e., Ares Commercial and AJX Old go up and down completely randomly.

Pair Corralation between Ares Commercial and AJX Old

Given the investment horizon of 90 days Ares Commercial Real is expected to under-perform the AJX Old. But the stock apears to be less risky and, when comparing its historical volatility, Ares Commercial Real is 21.28 times less risky than AJX Old. The stock trades about -0.02 of its potential returns per unit of risk. The AJX Old is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  708.00  in AJX Old on October 9, 2024 and sell it today you would lose (408.00) from holding AJX Old or give up 57.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.56%
Values	Daily Returns

Ares Commercial Real  vs.  AJX Old

Ares Commercial Real

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, Ares Commercial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

AJX Old

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days AJX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady forward-looking indicators, AJX Old showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Commercial and AJX Old

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

The idea behind Ares Commercial Real and AJX Old 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.