Correlation Between Ares Management and Federated Investors

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

Diversification Opportunities for Ares Management and Federated Investors

0.76

Correlation Coefficient

Ares Management  Federated Investors

Poor diversification

The 3 months correlation between Ares and Federated is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors 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 Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of Ares Management i.e., Ares Management and Federated Investors go up and down completely randomly.

Pair Corralation between Ares Management and Federated Investors

Given the investment horizon of 90 days Ares Management LP is expected to generate 1.71 times more return on investment than Federated Investors. However, Ares Management is 1.71 times more volatile than Federated Investors B. It trades about 0.11 of its potential returns per unit of risk. Federated Investors B is currently generating about -0.32 per unit of risk. If you would invest  17,522  in Ares Management LP on October 11, 2024 and sell it today you would earn a total of  708.00  from holding Ares Management LP or generate 4.04% return on investment over 90 days.

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

Ares Management LP  vs.  Federated Investors B

Ares Management LP

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Federated Investors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Investors B are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Federated Investors may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ares Management and Federated Investors

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

The idea behind Ares Management LP and Federated Investors B 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 Commodity Directory module to find actively traded commodities issued by global exchanges.