Correlation Between Ares Management and Toro

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

By analyzing existing cross correlation between Ares Management Corp and Toro Co, you can compare the effects of market volatilities on Ares Management and Toro 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 Management with a short position of Toro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Toro.

Diversification Opportunities for Ares Management and Toro

0.29

Correlation Coefficient

Ares Management  Toro

Modest diversification

The 3 months correlation between Ares and Toro is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Ares Management 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 Management Corp are associated (or correlated) with Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of Ares Management i.e., Ares Management and Toro go up and down completely randomly.

Pair Corralation between Ares Management and Toro

Assuming the 90 days trading horizon Ares Management Corp is expected to generate 1.14 times more return on investment than Toro. However, Ares Management is 1.14 times more volatile than Toro Co. It trades about 0.06 of its potential returns per unit of risk. Toro Co is currently generating about -0.38 per unit of risk. If you would invest  5,520  in Ares Management Corp on October 10, 2024 and sell it today you would earn a total of  85.00  from holding Ares Management Corp or generate 1.54% return on investment over 90 days.

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

Ares Management Corp  vs.  Toro Co

Ares Management Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Ares Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro 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 Management and Toro

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

The idea behind Ares Management Corp and Toro Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..