Correlation Between Ariel International and Johcm International

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

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

Diversification Opportunities for Ariel International and Johcm International

0.84

Correlation Coefficient

Ariel International  Johcm International

Very poor diversification

The 3 months correlation between Ariel and Johcm is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ariel International Fund and Johcm International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johcm International and Ariel International 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 International Fund are associated (or correlated) with Johcm International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johcm International has no effect on the direction of Ariel International i.e., Ariel International and Johcm International go up and down completely randomly.

Pair Corralation between Ariel International and Johcm International

Assuming the 90 days horizon Ariel International Fund is expected to generate 0.99 times more return on investment than Johcm International. However, Ariel International Fund is 1.02 times less risky than Johcm International. It trades about 0.16 of its potential returns per unit of risk. Johcm International Select is currently generating about 0.01 per unit of risk. If you would invest  1,430  in Ariel International Fund on November 30, 2024 and sell it today you would earn a total of  133.00  from holding Ariel International Fund or generate 9.3% return on investment over 90 days.

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

Ariel International Fund  vs.  Johcm International Select

Ariel International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel International Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Johcm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Johcm International Select has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Johcm International 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 International and Johcm International

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

The idea behind Ariel International Fund and Johcm International Select 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.