Correlation Between Sprott Physical and Ares Management

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

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

Diversification Opportunities for Sprott Physical and Ares Management

-0.36

Correlation Coefficient

Sprott Physical  Ares Management

Very good diversification

The 3 months correlation between Sprott and Ares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Gold and Ares Management LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management LP and Sprott Physical 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 Sprott Physical Gold 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 LP has no effect on the direction of Sprott Physical i.e., Sprott Physical and Ares Management go up and down completely randomly.

Pair Corralation between Sprott Physical and Ares Management

Considering the 90-day investment horizon Sprott Physical Gold is expected to under-perform the Ares Management. But the etf apears to be less risky and, when comparing its historical volatility, Sprott Physical Gold is 1.31 times less risky than Ares Management. The etf trades about -0.02 of its potential returns per unit of risk. The Ares Management LP is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,181  in Ares Management LP on October 15, 2024 and sell it today you would earn a total of  1,323  from holding Ares Management LP or generate 8.18% return on investment over 90 days.

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

Sprott Physical Gold  vs.  Ares Management LP

Sprott Physical Gold

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ares Management LP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ares Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sprott Physical and Ares Management

The main advantage of trading using opposite Sprott Physical and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical 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 Sprott Physical Gold and Ares Management LP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.