Correlation Between Via Renewables and Ares Management

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

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

Diversification Opportunities for Via Renewables and Ares Management

0.76

Correlation Coefficient

Via Renewables  Ares Management

Poor diversification

The 3 months correlation between Via and Ares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Via Renewables 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 Via Renewables 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 Via Renewables 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 Via Renewables i.e., Via Renewables and Ares Management go up and down completely randomly.

Pair Corralation between Via Renewables and Ares Management

Assuming the 90 days horizon Via Renewables is expected to generate 0.39 times more return on investment than Ares Management. However, Via Renewables is 2.59 times less risky than Ares Management. It trades about 0.4 of its potential returns per unit of risk. Ares Management LP is currently generating about 0.06 per unit of risk. If you would invest  2,205  in Via Renewables on September 27, 2024 and sell it today you would earn a total of  135.00  from holding Via Renewables or generate 6.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Via Renewables  vs.  Ares Management LP

Via Renewables

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Ares Management LP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent 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 Via Renewables and Ares Management

The main advantage of trading using opposite Via Renewables and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Via Renewables 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 Via Renewables 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.