Correlation Between Brookfield Real and Ares Management

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

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

Diversification Opportunities for Brookfield Real and Ares Management

0.42

Correlation Coefficient

Brookfield Real  Ares Management

Very weak diversification

The 3 months correlation between Brookfield and Ares is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Real Assets 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 Brookfield Real 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 Brookfield Real Assets 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 Brookfield Real i.e., Brookfield Real and Ares Management go up and down completely randomly.

Pair Corralation between Brookfield Real and Ares Management

Allowing for the 90-day total investment horizon Brookfield Real is expected to generate 9.63 times less return on investment than Ares Management. But when comparing it to its historical volatility, Brookfield Real Assets is 3.59 times less risky than Ares Management. It trades about 0.09 of its potential returns per unit of risk. Ares Management LP is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  14,293  in Ares Management LP on September 12, 2024 and sell it today you would earn a total of  3,952  from holding Ares Management LP or generate 27.65% return on investment over 90 days.

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

Brookfield Real Assets  vs.  Ares Management LP

Brookfield Real Assets

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Real Assets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Brookfield Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ares Management LP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 18 (%) 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 Brookfield Real and Ares Management

The main advantage of trading using opposite Brookfield Real and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Real 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 Brookfield Real Assets 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.