Correlation Between Ares Dynamic and Flaherty Crumrine

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

By analyzing existing cross correlation between Ares Dynamic Credit and Flaherty Crumrine Preferred, you can compare the effects of market volatilities on Ares Dynamic and Flaherty Crumrine 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 Dynamic with a short position of Flaherty Crumrine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Dynamic and Flaherty Crumrine.

Diversification Opportunities for Ares Dynamic and Flaherty Crumrine

-0.23

Correlation Coefficient

Ares Dynamic  Flaherty Crumrine

Very good diversification

The 3 months correlation between Ares and Flaherty is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ares Dynamic Credit and Flaherty Crumrine Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flaherty Crumrine and Ares Dynamic 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 Dynamic Credit are associated (or correlated) with Flaherty Crumrine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flaherty Crumrine has no effect on the direction of Ares Dynamic i.e., Ares Dynamic and Flaherty Crumrine go up and down completely randomly.

Pair Corralation between Ares Dynamic and Flaherty Crumrine

Given the investment horizon of 90 days Ares Dynamic Credit is expected to generate 0.82 times more return on investment than Flaherty Crumrine. However, Ares Dynamic Credit is 1.21 times less risky than Flaherty Crumrine. It trades about 0.06 of its potential returns per unit of risk. Flaherty Crumrine Preferred is currently generating about 0.04 per unit of risk. If you would invest  1,506  in Ares Dynamic Credit on September 3, 2024 and sell it today you would earn a total of  28.00  from holding Ares Dynamic Credit or generate 1.86% return on investment over 90 days.

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

Ares Dynamic Credit  vs.  Flaherty Crumrine Preferred

Ares Dynamic Credit

Risk-Adjusted Performance

4 of 100

Insignificant

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

Flaherty Crumrine

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Ares Dynamic and Flaherty Crumrine

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

The idea behind Ares Dynamic Credit and Flaherty Crumrine Preferred 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.