Correlation Between Vine Hill and Ares AcquisitionII

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

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

Diversification Opportunities for Vine Hill and Ares AcquisitionII

-0.16

Correlation Coefficient

Vine Hill  Ares AcquisitionII

Good diversification

The 3 months correlation between Vine and Ares is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vine Hill Capital and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares AcquisitionII and Vine Hill 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 Vine Hill Capital are associated (or correlated) with Ares AcquisitionII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares AcquisitionII has no effect on the direction of Vine Hill i.e., Vine Hill and Ares AcquisitionII go up and down completely randomly.

Pair Corralation between Vine Hill and Ares AcquisitionII

Given the investment horizon of 90 days Vine Hill is expected to generate 1.05 times less return on investment than Ares AcquisitionII. But when comparing it to its historical volatility, Vine Hill Capital is 4.48 times less risky than Ares AcquisitionII. It trades about 0.22 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Ares Acquisition on October 3, 2024 and sell it today you would earn a total of  84.00  from holding Ares Acquisition or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	11.48%
Values	Daily Returns

Vine Hill Capital  vs.  Ares Acquisition

Vine Hill Capital

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vine Hill Capital are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Vine Hill is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ares AcquisitionII

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares AcquisitionII is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vine Hill and Ares AcquisitionII

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

The idea behind Vine Hill Capital and Ares Acquisition 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.