Correlation Between Cherry Hill and Ares Commercial

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

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

Diversification Opportunities for Cherry Hill and Ares Commercial

-0.75

Correlation Coefficient

Cherry Hill  Ares Commercial

Pay attention - limited upside

The 3 months correlation between Cherry and Ares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and Ares Commercial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Commercial Real and Cherry Hill 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 Cherry Hill Mortgage are associated (or correlated) with Ares Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Commercial Real has no effect on the direction of Cherry Hill i.e., Cherry Hill and Ares Commercial go up and down completely randomly.

Pair Corralation between Cherry Hill and Ares Commercial

Given the investment horizon of 90 days Cherry Hill Mortgage is expected to generate 0.89 times more return on investment than Ares Commercial. However, Cherry Hill Mortgage is 1.13 times less risky than Ares Commercial. It trades about 0.24 of its potential returns per unit of risk. Ares Commercial Real is currently generating about -0.11 per unit of risk. If you would invest  261.00  in Cherry Hill Mortgage on December 28, 2024 and sell it today you would earn a total of  95.00  from holding Cherry Hill Mortgage or generate 36.4% return on investment over 90 days.

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

Cherry Hill Mortgage  vs.  Ares Commercial Real

Cherry Hill Mortgage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cherry Hill Mortgage are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, Cherry Hill demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ares Commercial Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cherry Hill and Ares Commercial

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

The idea behind Cherry Hill Mortgage and Ares Commercial Real 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.