Correlation Between Investor and Ares Management

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

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

Diversification Opportunities for Investor and Ares Management

-0.8

Correlation Coefficient

Investor  Ares Management

Pay attention - limited upside

The 3 months correlation between Investor and Ares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB 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 Investor 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 Investor AB 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 Investor i.e., Investor and Ares Management go up and down completely randomly.

Pair Corralation between Investor and Ares Management

Assuming the 90 days horizon Investor AB is expected to under-perform the Ares Management. But the pink sheet apears to be less risky and, when comparing its historical volatility, Investor AB is 2.23 times less risky than Ares Management. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Ares Management LP is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  16,693  in Ares Management LP on October 22, 2024 and sell it today you would earn a total of  2,439  from holding Ares Management LP or generate 14.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Investor AB  vs.  Ares Management LP

Investor AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ares Management LP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 10 (%) 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 Investor and Ares Management

The main advantage of trading using opposite Investor and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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 Investor AB 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.