Correlation Between 3i Group and Ares Management

Can any of the company-specific risk be diversified away by investing in both 3i Group 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 3i Group and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3i Group PLC and Ares Management LP, you can compare the effects of market volatilities on 3i Group 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 3i Group with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3i Group and Ares Management.

Diversification Opportunities for 3i Group and Ares Management

-0.2

Correlation Coefficient

3i Group  Ares Management

Good diversification

The 3 months correlation between TGOPY and Ares is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding 3i Group PLC 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 3i Group 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 3i Group PLC 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 3i Group i.e., 3i Group and Ares Management go up and down completely randomly.

Pair Corralation between 3i Group and Ares Management

Assuming the 90 days horizon 3i Group PLC is expected to generate 0.69 times more return on investment than Ares Management. However, 3i Group PLC is 1.45 times less risky than Ares Management. It trades about 0.07 of its potential returns per unit of risk. Ares Management LP is currently generating about -0.09 per unit of risk. If you would invest  2,287  in 3i Group PLC on December 27, 2024 and sell it today you would earn a total of  151.00  from holding 3i Group PLC or generate 6.6% return on investment over 90 days.

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

3i Group PLC  vs.  Ares Management LP

3i Group PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, 3i Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 3i Group and Ares Management

The main advantage of trading using opposite 3i Group and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3i Group 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 3i Group PLC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.