Correlation Between Ares Management and BlackRock Capital

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

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

Diversification Opportunities for Ares Management and BlackRock Capital

0.34

Correlation Coefficient

Ares Management  BlackRock Capital

Weak diversification

The 3 months correlation between Ares and BlackRock is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and BlackRock Capital Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Capital 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 LP are associated (or correlated) with BlackRock Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Capital has no effect on the direction of Ares Management i.e., Ares Management and BlackRock Capital go up and down completely randomly.

Pair Corralation between Ares Management and BlackRock Capital

Given the investment horizon of 90 days Ares Management LP is expected to under-perform the BlackRock Capital. In addition to that, Ares Management is 3.54 times more volatile than BlackRock Capital Allocation. It trades about -0.09 of its total potential returns per unit of risk. BlackRock Capital Allocation is currently generating about -0.01 per unit of volatility. If you would invest  1,469  in BlackRock Capital Allocation on December 26, 2024 and sell it today you would lose (11.00) from holding BlackRock Capital Allocation or give up 0.75% of portfolio value over 90 days.

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

Ares Management LP  vs.  BlackRock Capital Allocation

Ares Management LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management LP 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BlackRock Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Capital Allocation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BlackRock Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ares Management and BlackRock Capital

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

The idea behind Ares Management LP and BlackRock Capital Allocation 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.