Correlation Between Regional Management and Ares Management

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

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

Diversification Opportunities for Regional Management and Ares Management

0.93

Correlation Coefficient

Regional Management  Ares Management

Almost no diversification

The 3 months correlation between Regional and Ares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp 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 Regional Management 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 Regional Management Corp 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 Regional Management i.e., Regional Management and Ares Management go up and down completely randomly.

Pair Corralation between Regional Management and Ares Management

Allowing for the 90-day total investment horizon Regional Management Corp is expected to generate 0.84 times more return on investment than Ares Management. However, Regional Management Corp is 1.2 times less risky than Ares Management. It trades about -0.03 of its potential returns per unit of risk. Ares Management LP is currently generating about -0.11 per unit of risk. If you would invest  3,322  in Regional Management Corp on December 28, 2024 and sell it today you would lose (162.00) from holding Regional Management Corp or give up 4.88% of portfolio value over 90 days.

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

Regional Management Corp  vs.  Ares Management LP

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Ares Management LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Regional Management and Ares Management

The main advantage of trading using opposite Regional Management and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management 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 Regional Management Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.