Correlation Between Ariel Appreciation and Ariel Global

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

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

Diversification Opportunities for Ariel Appreciation and Ariel Global

-0.19

Correlation Coefficient

Ariel Appreciation  Ariel Global

Good diversification

The 3 months correlation between Ariel and Ariel is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Appreciation Fund and Ariel Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Global and Ariel Appreciation 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 Appreciation Fund are associated (or correlated) with Ariel Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Global has no effect on the direction of Ariel Appreciation i.e., Ariel Appreciation and Ariel Global go up and down completely randomly.

Pair Corralation between Ariel Appreciation and Ariel Global

Assuming the 90 days horizon Ariel Appreciation Fund is expected to under-perform the Ariel Global. In addition to that, Ariel Appreciation is 1.36 times more volatile than Ariel Global Fund. It trades about -0.07 of its total potential returns per unit of risk. Ariel Global Fund is currently generating about 0.14 per unit of volatility. If you would invest  1,299  in Ariel Global Fund on December 28, 2024 and sell it today you would earn a total of  89.00  from holding Ariel Global Fund or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ariel Appreciation Fund  vs.  Ariel Global Fund

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.

Ariel Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Global Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ariel Appreciation and Ariel Global

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

The idea behind Ariel Appreciation Fund and Ariel Global 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.