Correlation Between Ares Capital and Smurfit Kappa

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

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

Diversification Opportunities for Ares Capital and Smurfit Kappa

0.0

Correlation Coefficient

Ares Capital  Smurfit Kappa

Pay attention - limited upside

The 3 months correlation between Ares and Smurfit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group 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 Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Ares Capital i.e., Ares Capital and Smurfit Kappa go up and down completely randomly.

Pair Corralation between Ares Capital and Smurfit Kappa

If you would invest  2,145  in Ares Capital on December 29, 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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ares Capital  vs.  Smurfit Kappa Group

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.

Smurfit Kappa Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit Kappa Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Smurfit Kappa 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 Smurfit Kappa

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

The idea behind Ares Capital and Smurfit Kappa Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.