Correlation Between Ares Management and Netcapital

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

Diversification Opportunities for Ares Management and Netcapital

0.17

Correlation Coefficient

Ares Management  Netcapital

Average diversification

The 3 months correlation between Ares and Netcapital is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital 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 Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Ares Management i.e., Ares Management and Netcapital go up and down completely randomly.

Pair Corralation between Ares Management and Netcapital

Given the investment horizon of 90 days Ares Management LP is expected to under-perform the Netcapital. But the stock apears to be less risky and, when comparing its historical volatility, Ares Management LP is 3.0 times less risky than Netcapital. The stock trades about -0.03 of its potential returns per unit of risk. The Netcapital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Netcapital on November 28, 2024 and sell it today you would earn a total of  15.00  from holding Netcapital or generate 7.85% return on investment over 90 days.

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

Ares Management LP  vs.  Netcapital

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 comparatively stable technical and fundamental indicators, Ares Management is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Netcapital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and Netcapital

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

The idea behind Ares Management LP and Netcapital 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.