Correlation Between Ariel Global and Ariel Focus

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

By analyzing existing cross correlation between Ariel Global Fund and Ariel Focus Fund, you can compare the effects of market volatilities on Ariel Global and Ariel Focus 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 Ariel Global with a short position of Ariel Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Global and Ariel Focus.

Diversification Opportunities for Ariel Global and Ariel Focus

-0.2

Correlation Coefficient

Ariel Global  Ariel Focus

Good diversification

The 3 months correlation between Ariel and Ariel is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Global Fund and Ariel Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Focus Fund and Ariel Global 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 Ariel Global Fund are associated (or correlated) with Ariel Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Focus Fund has no effect on the direction of Ariel Global i.e., Ariel Global and Ariel Focus go up and down completely randomly.

Pair Corralation between Ariel Global and Ariel Focus

Assuming the 90 days horizon Ariel Global Fund is expected to generate 0.82 times more return on investment than Ariel Focus. However, Ariel Global Fund is 1.22 times less risky than Ariel Focus. It trades about 0.14 of its potential returns per unit of risk. Ariel Focus Fund is currently generating about -0.03 per unit of risk. If you would invest  1,237  in Ariel Global Fund on December 28, 2024 and sell it today you would earn a total of  85.00  from holding Ariel Global Fund or generate 6.87% return on investment over 90 days.

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

Ariel Global Fund  vs.  Ariel Focus Fund

Ariel Global

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Global Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ariel Focus Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ariel Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ariel Focus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ariel Global and Ariel Focus

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

The idea behind Ariel Global Fund and Ariel Focus Fund 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.