Correlation Between Molson Coors and Ares Management

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

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

Diversification Opportunities for Molson Coors and Ares Management

0.85

Correlation Coefficient

Molson Coors  Ares Management

Very poor diversification

The 3 months correlation between Molson and Ares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage and Ares Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management and Molson Coors 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 Molson Coors Beverage 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 Molson Coors i.e., Molson Coors and Ares Management go up and down completely randomly.

Pair Corralation between Molson Coors and Ares Management

Assuming the 90 days trading horizon Molson Coors is expected to generate 31.18 times less return on investment than Ares Management. But when comparing it to its historical volatility, Molson Coors Beverage is 21.32 times less risky than Ares Management. It trades about 0.13 of its potential returns per unit of risk. Ares Management is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  9,592  in Ares Management on October 25, 2024 and sell it today you would earn a total of  1,924  from holding Ares Management or generate 20.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Molson Coors Beverage  vs.  Ares Management

Molson Coors Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Molson Coors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ares Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management are ranked lower than 15 (%) 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 Molson Coors and Ares Management

The main advantage of trading using opposite Molson Coors and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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 Molson Coors Beverage 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.