Correlation Between Ares Management and Federated Premier

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

Diversification Opportunities for Ares Management and Federated Premier

-0.75

Correlation Coefficient

Ares Management  Federated Premier

Pay attention - limited upside

The 3 months correlation between Ares and Federated is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier 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 Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Ares Management i.e., Ares Management and Federated Premier go up and down completely randomly.

Pair Corralation between Ares Management and Federated Premier

Given the investment horizon of 90 days Ares Management LP is expected to generate 2.71 times more return on investment than Federated Premier. However, Ares Management is 2.71 times more volatile than Federated Premier Municipal. It trades about 0.12 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.04 per unit of risk. If you would invest  6,450  in Ares Management LP on September 23, 2024 and sell it today you would earn a total of  11,154  from holding Ares Management LP or generate 172.93% return on investment over 90 days.

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

Ares Management LP  vs.  Federated Premier Municipal

Ares Management LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 9 (%) 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 Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Ares Management and Federated Premier

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

The idea behind Ares Management LP and Federated Premier Municipal 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.