Correlation Between Energisa and Ares Management

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

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

Diversification Opportunities for Energisa and Ares Management

-0.48

Correlation Coefficient

Energisa  Ares Management

Very good diversification

The 3 months correlation between Energisa and Ares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Ares Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management and Energisa 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 Energisa SA 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 has no effect on the direction of Energisa i.e., Energisa and Ares Management go up and down completely randomly.

Pair Corralation between Energisa and Ares Management

Assuming the 90 days trading horizon Energisa SA is expected to generate 0.86 times more return on investment than Ares Management. However, Energisa SA is 1.16 times less risky than Ares Management. It trades about 0.09 of its potential returns per unit of risk. Ares Management is currently generating about -0.17 per unit of risk. If you would invest  3,719  in Energisa SA on December 25, 2024 and sell it today you would earn a total of  383.00  from holding Energisa SA or generate 10.3% return on investment over 90 days.

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

Energisa SA  vs.  Ares Management

Energisa SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Energisa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ares Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Energisa and Ares Management

The main advantage of trading using opposite Energisa and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa 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 Energisa SA and Ares Management 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.