Correlation Between Ares Management and 3i Group

Can any of the company-specific risk be diversified away by investing in both Ares Management and 3i Group 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 3i Group 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 3i Group plc, you can compare the effects of market volatilities on Ares Management and 3i Group 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 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and 3i Group.

Diversification Opportunities for Ares Management and 3i Group

0.66

Correlation Coefficient

Ares Management  3i Group

Poor diversification

The 3 months correlation between Ares and TGOPF is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and 3i Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group plc 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 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group plc has no effect on the direction of Ares Management i.e., Ares Management and 3i Group go up and down completely randomly.

Pair Corralation between Ares Management and 3i Group

Given the investment horizon of 90 days Ares Management LP is expected to generate 0.71 times more return on investment than 3i Group. However, Ares Management LP is 1.4 times less risky than 3i Group. It trades about 0.22 of its potential returns per unit of risk. 3i Group plc is currently generating about 0.09 per unit of risk. If you would invest  14,647  in Ares Management LP on September 13, 2024 and sell it today you would earn a total of  3,598  from holding Ares Management LP or generate 24.56% 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.  3i Group plc

Ares Management LP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 17 (%) 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.

3i Group plc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, 3i Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and 3i Group

The main advantage of trading using opposite Ares Management and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.

The idea behind Ares Management LP and 3i Group plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.