Correlation Between RiverNorthDoubleLine and Ares Capital

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

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

Diversification Opportunities for RiverNorthDoubleLine and Ares Capital

-0.72

Correlation Coefficient

RiverNorthDoubleLine  Ares Capital

Pay attention - limited upside

The 3 months correlation between RiverNorthDoubleLine and Ares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorthDoubleLine Strategic and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and RiverNorthDoubleLine 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 RiverNorthDoubleLine Strategic Opportunity are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of RiverNorthDoubleLine i.e., RiverNorthDoubleLine and Ares Capital go up and down completely randomly.

Pair Corralation between RiverNorthDoubleLine and Ares Capital

Considering the 90-day investment horizon RiverNorthDoubleLine Strategic Opportunity is expected to under-perform the Ares Capital. But the etf apears to be less risky and, when comparing its historical volatility, RiverNorthDoubleLine Strategic Opportunity is 1.17 times less risky than Ares Capital. The etf trades about -0.11 of its potential returns per unit of risk. The Ares Capital is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,005  in Ares Capital on September 11, 2024 and sell it today you would earn a total of  222.00  from holding Ares Capital or generate 11.07% return on investment over 90 days.

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

RiverNorthDoubleLine Strategic  vs.  Ares Capital

RiverNorthDoubleLine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RiverNorthDoubleLine Strategic Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, RiverNorthDoubleLine is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ares Capital

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ares Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RiverNorthDoubleLine and Ares Capital

The main advantage of trading using opposite RiverNorthDoubleLine and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RiverNorthDoubleLine position performs unexpectedly, Ares Capital 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 Capital will offset losses from the drop in Ares Capital's long position.

The idea behind RiverNorthDoubleLine Strategic Opportunity and Ares Capital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.