Correlation Between Ares Capital and Elysee Development

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

By analyzing existing cross correlation between Ares Capital and Elysee Development Corp, you can compare the effects of market volatilities on Ares Capital and Elysee Development 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 Capital with a short position of Elysee Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and Elysee Development.

Diversification Opportunities for Ares Capital and Elysee Development

-0.57

Correlation Coefficient

Ares Capital  Elysee Development

Excellent diversification

The 3 months correlation between Ares and Elysee is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Elysee Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elysee Development Corp and Ares Capital 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 Capital are associated (or correlated) with Elysee Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elysee Development Corp has no effect on the direction of Ares Capital i.e., Ares Capital and Elysee Development go up and down completely randomly.

Pair Corralation between Ares Capital and Elysee Development

Given the investment horizon of 90 days Ares Capital is expected to generate 1.43 times less return on investment than Elysee Development. But when comparing it to its historical volatility, Ares Capital is 8.43 times less risky than Elysee Development. It trades about 0.12 of its potential returns per unit of risk. Elysee Development Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Elysee Development Corp on October 5, 2024 and sell it today you would lose (4.00) from holding Elysee Development Corp or give up 16.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.01%
Values	Daily Returns

Ares Capital  vs.  Elysee Development Corp

Ares Capital

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ares Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Elysee Development Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elysee Development Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ares Capital and Elysee Development

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

The idea behind Ares Capital and Elysee Development Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.