Correlation Between Federated Premier and Ares Management

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

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

Diversification Opportunities for Federated Premier and Ares Management

-0.75

Correlation Coefficient

Federated Premier  Ares Management

Pay attention - limited upside

The 3 months correlation between Federated and Ares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal 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 Federated Premier 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 Federated Premier Municipal 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 Federated Premier i.e., Federated Premier and Ares Management go up and down completely randomly.

Pair Corralation between Federated Premier and Ares Management

Considering the 90-day investment horizon Federated Premier is expected to generate 8.48 times less return on investment than Ares Management. But when comparing it to its historical volatility, Federated Premier Municipal is 2.71 times less risky than Ares Management. It trades about 0.04 of its potential returns per unit of risk. Ares Management LP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,450  in Ares Management LP on September 23, 2024 and sell it today you would earn a total of  11,154  from holding Ares Management LP or generate 172.93% return on investment over 90 days.

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

Federated Premier Municipal  vs.  Ares Management LP

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Ares Management LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federated Premier and Ares Management

The main advantage of trading using opposite Federated Premier and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Premier 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 Federated Premier Municipal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.