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 is expected to generate 1.36 times less return on investment than Ariel Appreciation. In addition to that, Ariel Fund is 1.01 times more volatile than Ariel Appreciation Fund. It trades about 0.19 of its total potential returns per unit of risk. Ariel Appreciation Fund is currently generating about 0.26 per unit of volatility. If you would invest  4,198  in Ariel Appreciation Fund on September 1, 2024 and sell it today you would earn a total of  312.00  from holding Ariel Appreciation Fund or generate 7.43% return on investment over 90 days.

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

Ariel Fund Investor  vs.  Ariel Appreciation Fund

Ariel Fund Investor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Fund Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ariel Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ariel Appreciation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Appreciation Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel Appreciation may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.