Correlation Between Ariel Fund and Ariel Appreciation

Can any of the company-specific risk be diversified away by investing in both Ariel Fund and Ariel Appreciation 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 Ariel Fund and Ariel Appreciation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ariel Fund Investor and Ariel Appreciation Fund, you can compare the effects of market volatilities on Ariel Fund and Ariel Appreciation 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 Ariel Fund with a short position of Ariel Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Fund and Ariel Appreciation.

Diversification Opportunities for Ariel Fund and Ariel Appreciation

0.99

Correlation Coefficient

Ariel Fund  Ariel Appreciation

No risk reduction

The 3 months correlation between Ariel and Ariel is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Fund Investor and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation and Ariel Fund 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 Ariel Fund Investor are associated (or correlated) with Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Ariel Fund i.e., Ariel Fund and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Ariel Fund and Ariel Appreciation

Assuming the 90 days horizon Ariel Fund Investor is expected to under-perform the Ariel Appreciation. In addition to that, Ariel Fund is 1.03 times more volatile than Ariel Appreciation Fund. It trades about -0.08 of its total potential returns per unit of risk. Ariel Appreciation Fund is currently generating about -0.07 per unit of volatility. If you would invest  3,930  in Ariel Appreciation Fund on December 27, 2024 and sell it today you would lose (197.00) from holding Ariel Appreciation Fund or give up 5.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Ariel Fund Investor  vs.  Ariel Appreciation Fund

Ariel Fund Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ariel Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Ariel Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel Appreciation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ariel Appreciation Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ariel Appreciation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ariel Fund and Ariel Appreciation

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

The idea behind Ariel Fund Investor and Ariel Appreciation Fund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.