Correlation Between Ares Capital and ClimateRock

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

By analyzing existing cross correlation between Ares Capital and ClimateRock Class A, you can compare the effects of market volatilities on Ares Capital and ClimateRock 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 ClimateRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and ClimateRock.

Diversification Opportunities for Ares Capital and ClimateRock

0.22

Correlation Coefficient

Ares Capital  ClimateRock

Modest diversification

The 3 months correlation between Ares and ClimateRock is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and ClimateRock Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClimateRock Class 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 ClimateRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClimateRock Class has no effect on the direction of Ares Capital i.e., Ares Capital and ClimateRock go up and down completely randomly.

Pair Corralation between Ares Capital and ClimateRock

Given the investment horizon of 90 days Ares Capital is expected to generate 1.87 times more return on investment than ClimateRock. However, Ares Capital is 1.87 times more volatile than ClimateRock Class A. It trades about 0.05 of its potential returns per unit of risk. ClimateRock Class A is currently generating about 0.05 per unit of risk. If you would invest  2,145  in Ares Capital on December 30, 2024 and sell it today you would earn a total of  66.00  from holding Ares Capital or generate 3.08% return on investment over 90 days.

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

Ares Capital  vs.  ClimateRock Class A

Ares Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ares Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ClimateRock Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ClimateRock Class A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ClimateRock is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ares Capital and ClimateRock

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

The idea behind Ares Capital and ClimateRock Class A 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.