Correlation Between Ares Commercial and Claros Mortgage

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

Diversification Opportunities for Ares Commercial and Claros Mortgage

0.51

Correlation Coefficient

Ares Commercial  Claros Mortgage

Very weak diversification

The 3 months correlation between Ares and Claros is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real and Claros Mortgage Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Claros Mortgage Trust 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 Claros Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Claros Mortgage Trust has no effect on the direction of Ares Commercial i.e., Ares Commercial and Claros Mortgage go up and down completely randomly.

Pair Corralation between Ares Commercial and Claros Mortgage

Given the investment horizon of 90 days Ares Commercial Real is expected to under-perform the Claros Mortgage. But the stock apears to be less risky and, when comparing its historical volatility, Ares Commercial Real is 2.0 times less risky than Claros Mortgage. The stock trades about -0.12 of its potential returns per unit of risk. The Claros Mortgage Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  409.00  in Claros Mortgage Trust on December 27, 2024 and sell it today you would lose (18.00) from holding Claros Mortgage Trust or give up 4.4% of portfolio value over 90 days.

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

Ares Commercial Real  vs.  Claros Mortgage Trust

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.

Claros Mortgage Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Claros Mortgage Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Claros Mortgage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ares Commercial and Claros Mortgage

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

The idea behind Ares Commercial Real and Claros Mortgage Trust 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.