Correlation Between Ares Management and NXG NextGen

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

Diversification Opportunities for Ares Management and NXG NextGen

0.45

Correlation Coefficient

Ares Management  NXG NextGen

Very weak diversification

The 3 months correlation between Ares and NXG is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and NXG NextGen Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXG NextGen Infrastr 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 NXG NextGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXG NextGen Infrastr has no effect on the direction of Ares Management i.e., Ares Management and NXG NextGen go up and down completely randomly.

Pair Corralation between Ares Management and NXG NextGen

Given the investment horizon of 90 days Ares Management LP is expected to generate 0.77 times more return on investment than NXG NextGen. However, Ares Management LP is 1.3 times less risky than NXG NextGen. It trades about 0.11 of its potential returns per unit of risk. NXG NextGen Infrastructure is currently generating about -0.03 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	Weak
Accuracy	100.0%
Values	Daily Returns

Ares Management LP  vs.  NXG NextGen Infrastructure

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.

NXG NextGen Infrastr

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ares Management and NXG NextGen

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

The idea behind Ares Management LP and NXG NextGen Infrastructure 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.