Correlation Between Ares Management and Carlyle

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

Diversification Opportunities for Ares Management and Carlyle

0.96

Correlation Coefficient

Ares Management  Carlyle

Almost no diversification

The 3 months correlation between Ares and Carlyle is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group 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 Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Ares Management i.e., Ares Management and Carlyle go up and down completely randomly.

Pair Corralation between Ares Management and Carlyle

Given the investment horizon of 90 days Ares Management LP is expected to under-perform the Carlyle. But the stock apears to be less risky and, when comparing its historical volatility, Ares Management LP is 1.08 times less risky than Carlyle. The stock trades about -0.11 of its potential returns per unit of risk. The Carlyle Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,018  in Carlyle Group on December 28, 2024 and sell it today you would lose (509.00) from holding Carlyle Group or give up 10.14% of portfolio value over 90 days.

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

Ares Management LP  vs.  Carlyle Group

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.

Carlyle Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ares Management and Carlyle

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

The idea behind Ares Management LP and Carlyle Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.