Correlation Between Toro and Ares Management

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

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

Diversification Opportunities for Toro and Ares Management

0.69

Correlation Coefficient

Toro  Ares Management

Poor diversification

The 3 months correlation between Toro and Ares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Toro and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp and Toro 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 Toro 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 Corp has no effect on the direction of Toro i.e., Toro and Ares Management go up and down completely randomly.

Pair Corralation between Toro and Ares Management

Given the investment horizon of 90 days Toro is expected to under-perform the Ares Management. In addition to that, Toro is 1.32 times more volatile than Ares Management Corp. It trades about -0.1 of its total potential returns per unit of risk. Ares Management Corp is currently generating about -0.1 per unit of volatility. If you would invest  5,301  in Ares Management Corp on December 19, 2024 and sell it today you would lose (612.00) from holding Ares Management Corp or give up 11.54% of portfolio value over 90 days.

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

Toro  vs.  Ares Management Corp

Toro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toro 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 basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ares Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Toro and Ares Management

The main advantage of trading using opposite Toro and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro 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 Toro and Ares Management Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.