Correlation Between Carlyle and Ares Acquisition

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

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

Diversification Opportunities for Carlyle and Ares Acquisition

0.61

Correlation Coefficient

Carlyle  Ares Acquisition

Poor diversification

The 3 months correlation between Carlyle and Ares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition and Carlyle 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 Carlyle Group are associated (or correlated) with Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Carlyle i.e., Carlyle and Ares Acquisition go up and down completely randomly.

Pair Corralation between Carlyle and Ares Acquisition

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 17.02 times more return on investment than Ares Acquisition. However, Carlyle is 17.02 times more volatile than Ares Acquisition. It trades about 0.1 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.16 per unit of risk. If you would invest  4,470  in Carlyle Group on October 3, 2024 and sell it today you would earn a total of  579.00  from holding Carlyle Group or generate 12.95% return on investment over 90 days.

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

Carlyle Group  vs.  Ares Acquisition

Carlyle Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Ares Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ares Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Carlyle and Ares Acquisition

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

The idea behind Carlyle Group and Ares Acquisition 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.