Correlation Between Ares Management and Sprott Physical

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

Diversification Opportunities for Ares Management and Sprott Physical

0.3

Correlation Coefficient

Ares Management  Sprott Physical

Weak diversification

The 3 months correlation between Ares and Sprott is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Sprott Physical Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Platinum 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Platinum has no effect on the direction of Ares Management i.e., Ares Management and Sprott Physical go up and down completely randomly.

Pair Corralation between Ares Management and Sprott Physical

Given the investment horizon of 90 days Ares Management LP is expected to generate 1.66 times more return on investment than Sprott Physical. However, Ares Management is 1.66 times more volatile than Sprott Physical Platinum. It trades about 0.0 of its potential returns per unit of risk. Sprott Physical Platinum is currently generating about -0.02 per unit of risk. If you would invest  17,307  in Ares Management LP on December 2, 2024 and sell it today you would lose (213.00) from holding Ares Management LP or give up 1.23% of portfolio value over 90 days.

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

Ares Management LP  vs.  Sprott Physical Platinum

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.

Sprott Physical Platinum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Physical Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sprott Physical is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ares Management and Sprott Physical

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

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