Correlation Between Ares Dynamic and Royce Value

Can any of the company-specific risk be diversified away by investing in both Ares Dynamic and Royce Value 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 Royce Value 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 Royce Value Closed, you can compare the effects of market volatilities on Ares Dynamic and Royce Value 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 Royce Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Dynamic and Royce Value.

Diversification Opportunities for Ares Dynamic and Royce Value

0.88

Correlation Coefficient

Ares Dynamic  Royce Value

Very poor diversification

The 3 months correlation between Ares and Royce is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ares Dynamic Credit and Royce Value Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Value Closed 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 Royce Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Value Closed has no effect on the direction of Ares Dynamic i.e., Ares Dynamic and Royce Value go up and down completely randomly.

Pair Corralation between Ares Dynamic and Royce Value

Given the investment horizon of 90 days Ares Dynamic Credit is expected to generate 0.79 times more return on investment than Royce Value. However, Ares Dynamic Credit is 1.27 times less risky than Royce Value. It trades about -0.07 of its potential returns per unit of risk. Royce Value Closed is currently generating about -0.1 per unit of risk. If you would invest  1,471  in Ares Dynamic Credit on December 27, 2024 and sell it today you would lose (53.00) from holding Ares Dynamic Credit or give up 3.6% of portfolio value over 90 days.

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

Ares Dynamic Credit  vs.  Royce Value Closed

Ares Dynamic Credit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Dynamic Credit has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, Ares Dynamic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Royce Value Closed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Value Closed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ares Dynamic and Royce Value

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

The idea behind Ares Dynamic Credit and Royce Value Closed 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .