Correlation Between Ares Dynamic and Tekla World

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

Diversification Opportunities for Ares Dynamic and Tekla World

0.63

Correlation Coefficient

Ares Dynamic  Tekla World

Poor diversification

The 3 months correlation between Ares and Tekla is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ares Dynamic Credit and Tekla World Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla World Healthcare 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 Tekla World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla World Healthcare has no effect on the direction of Ares Dynamic i.e., Ares Dynamic and Tekla World go up and down completely randomly.

Pair Corralation between Ares Dynamic and Tekla World

Given the investment horizon of 90 days Ares Dynamic Credit is expected to under-perform the Tekla World. But the fund apears to be less risky and, when comparing its historical volatility, Ares Dynamic Credit is 1.28 times less risky than Tekla World. The fund trades about -0.11 of its potential returns per unit of risk. The Tekla World Healthcare is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,182  in Tekla World Healthcare on December 1, 2024 and sell it today you would earn a total of  25.00  from holding Tekla World Healthcare or generate 2.12% return on investment over 90 days.

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

Ares Dynamic Credit  vs.  Tekla World Healthcare

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.

Tekla World Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tekla World Healthcare are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly stable technical indicators, Tekla World is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ares Dynamic and Tekla World

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

The idea behind Ares Dynamic Credit and Tekla World Healthcare 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.