Correlation Between PT Bank and Ares Management

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

By analyzing existing cross correlation between PT Bank Rakyat and Ares Management Corp, you can compare the effects of market volatilities on PT Bank and Ares Management 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 PT Bank with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Ares Management.

Diversification Opportunities for PT Bank and Ares Management

-0.6

Correlation Coefficient

PT Bank  Ares Management

Excellent diversification

The 3 months correlation between BYRA and Ares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp and PT Bank 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 PT Bank Rakyat are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of PT Bank i.e., PT Bank and Ares Management go up and down completely randomly.

Pair Corralation between PT Bank and Ares Management

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Ares Management. But the stock apears to be less risky and, when comparing its historical volatility, PT Bank Rakyat is 1.31 times less risky than Ares Management. The stock trades about -0.14 of its potential returns per unit of risk. The Ares Management Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,384  in Ares Management Corp on September 2, 2024 and sell it today you would earn a total of  1,068  from holding Ares Management Corp or generate 6.94% return on investment over 90 days.

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

PT Bank Rakyat  vs.  Ares Management Corp

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ares Management Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ares Management reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Ares Management

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

The idea behind PT Bank Rakyat and Ares Management Corp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.