Correlation Between Ares Management and TPG

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

Diversification Opportunities for Ares Management and TPG

0.82

Correlation Coefficient

Ares Management  TPG

Very poor diversification

The 3 months correlation between Ares and TPG is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and TPG Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Inc 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 TPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Inc has no effect on the direction of Ares Management i.e., Ares Management and TPG go up and down completely randomly.

Pair Corralation between Ares Management and TPG

Given the investment horizon of 90 days Ares Management LP is expected to generate 0.97 times more return on investment than TPG. However, Ares Management LP is 1.03 times less risky than TPG. It trades about -0.09 of its potential returns per unit of risk. TPG Inc is currently generating about -0.13 per unit of risk. If you would invest  17,811  in Ares Management LP on December 27, 2024 and sell it today you would lose (2,483) from holding Ares Management LP or give up 13.94% of portfolio value over 90 days.

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

Ares Management LP  vs.  TPG Inc

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TPG Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPG Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ares Management and TPG

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

The idea behind Ares Management LP and TPG Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.