Correlation Between Ares Capital and Brookfield Real

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

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

Diversification Opportunities for Ares Capital and Brookfield Real

0.44

Correlation Coefficient

Ares Capital  Brookfield Real

Very weak diversification

The 3 months correlation between Ares and Brookfield is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Brookfield Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Real Assets 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 Brookfield Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Real Assets has no effect on the direction of Ares Capital i.e., Ares Capital and Brookfield Real go up and down completely randomly.

Pair Corralation between Ares Capital and Brookfield Real

Given the investment horizon of 90 days Ares Capital is expected to generate 1.47 times more return on investment than Brookfield Real. However, Ares Capital is 1.47 times more volatile than Brookfield Real Assets. It trades about 0.2 of its potential returns per unit of risk. Brookfield Real Assets is currently generating about 0.16 per unit of risk. If you would invest  2,038  in Ares Capital on September 5, 2024 and sell it today you would earn a total of  180.00  from holding Ares Capital or generate 8.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ares Capital  vs.  Brookfield Real Assets

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 January 2025.

Brookfield Real Assets

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Real Assets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Brookfield Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ares Capital and Brookfield Real

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

The idea behind Ares Capital and Brookfield Real Assets 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.