Correlation Between Ares Commercial and Cherry Hill

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

Diversification Opportunities for Ares Commercial and Cherry Hill

-0.75

Correlation Coefficient

Ares Commercial  Cherry Hill

Pay attention - limited upside

The 3 months correlation between Ares and Cherry is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage 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 Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Ares Commercial i.e., Ares Commercial and Cherry Hill go up and down completely randomly.

Pair Corralation between Ares Commercial and Cherry Hill

Given the investment horizon of 90 days Ares Commercial Real is expected to under-perform the Cherry Hill. In addition to that, Ares Commercial is 1.13 times more volatile than Cherry Hill Mortgage. It trades about -0.11 of its total potential returns per unit of risk. Cherry Hill Mortgage is currently generating about 0.24 per unit of volatility. If you would invest  261.00  in Cherry Hill Mortgage on December 28, 2024 and sell it today you would earn a total of  95.00  from holding Cherry Hill Mortgage or generate 36.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ares Commercial Real  vs.  Cherry Hill Mortgage

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.

Cherry Hill Mortgage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cherry Hill Mortgage are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, Cherry Hill demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Commercial and Cherry Hill

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

The idea behind Ares Commercial Real and Cherry Hill Mortgage 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.