Correlation Between Ariel Global and Ariel Appreciation

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

Diversification Opportunities for Ariel Global and Ariel Appreciation

0.07

Correlation Coefficient

Ariel Global  Ariel Appreciation

Significant diversification

The 3 months correlation between Ariel and Ariel is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Global Fund and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation 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 Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Ariel Global i.e., Ariel Global and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Ariel Global and Ariel Appreciation

Assuming the 90 days horizon Ariel Global is expected to generate 2.03 times less return on investment than Ariel Appreciation. But when comparing it to its historical volatility, Ariel Global Fund is 1.39 times less risky than Ariel Appreciation. It trades about 0.02 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,729  in Ariel Appreciation Fund on September 14, 2024 and sell it today you would earn a total of  704.00  from holding Ariel Appreciation Fund or generate 18.88% return on investment over 90 days.

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

Ariel Global Fund  vs.  Ariel Appreciation Fund

Ariel Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Global Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ariel Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel Appreciation

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Ariel Global and Ariel Appreciation

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

The idea behind Ariel Global Fund and Ariel Appreciation 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.

Check out your portfolio center.

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.