Correlation Between Ares Capital and T Rowe

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

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

Diversification Opportunities for Ares Capital and T Rowe

-0.62

Correlation Coefficient

Ares Capital  T Rowe

Excellent diversification

The 3 months correlation between Ares and TROW is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Ares Capital i.e., Ares Capital and T Rowe go up and down completely randomly.

Pair Corralation between Ares Capital and T Rowe

Given the investment horizon of 90 days Ares Capital is expected to generate 0.72 times more return on investment than T Rowe. However, Ares Capital is 1.39 times less risky than T Rowe. It trades about -0.06 of its potential returns per unit of risk. T Rowe Price is currently generating about -0.37 per unit of risk. If you would invest  2,367  in Ares Capital on December 2, 2024 and sell it today you would lose (29.00) from holding Ares Capital or give up 1.23% of portfolio value over 90 days.

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

Ares Capital  vs.  T Rowe Price

Ares Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 12 (%) 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 April 2025.

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ares Capital and T Rowe

The main advantage of trading using opposite Ares Capital and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Ares Capital and T Rowe Price 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.