Correlation Between Xp and Ares Management

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

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

Diversification Opportunities for Xp and Ares Management

-0.48

Correlation Coefficient

Xp  Ares Management

Very good diversification

The 3 months correlation between Xp and Ares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc 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 Xp 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 Xp Inc 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 Xp i.e., Xp and Ares Management go up and down completely randomly.

Pair Corralation between Xp and Ares Management

Allowing for the 90-day total investment horizon Xp Inc is expected to generate 1.05 times more return on investment than Ares Management. However, Xp is 1.05 times more volatile than Ares Management LP. It trades about 0.13 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  1,218  in Xp Inc on December 26, 2024 and sell it today you would earn a total of  247.00  from holding Xp Inc or generate 20.28% return on investment over 90 days.

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

Xp Inc  vs.  Ares Management LP

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Xp reported solid returns over the last few months and may actually be approaching a breakup point.

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 Xp and Ares Management

The main advantage of trading using opposite Xp and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp 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 Xp Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.