Correlation Between Fras Le and Ares Management

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

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

Diversification Opportunities for Fras Le and Ares Management

-0.13

Correlation Coefficient

Fras Le  Ares Management

Good diversification

The 3 months correlation between Fras and Ares is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Ares Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management and Fras Le 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 Fras le 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 Fras Le i.e., Fras Le and Ares Management go up and down completely randomly.

Pair Corralation between Fras Le and Ares Management

Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Ares Management. But the stock apears to be less risky and, when comparing its historical volatility, Fras le SA is 1.17 times less risky than Ares Management. The stock trades about -0.02 of its potential returns per unit of risk. The Ares Management is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  8,746  in Ares Management on October 6, 2024 and sell it today you would earn a total of  2,444  from holding Ares Management or generate 27.94% return on investment over 90 days.

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

Fras le SA  vs.  Ares Management

Fras le SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fras le SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ares Management

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ares Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fras Le and Ares Management

The main advantage of trading using opposite Fras Le and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le 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 Fras le 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.