Correlation Between Ares Management and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Ares Management and Federal Agricultural 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 Ares Management and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management Corp and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Ares Management and Federal Agricultural 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 Ares Management with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Federal Agricultural.
Diversification Opportunities for Ares Management and Federal Agricultural
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and Federal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Ares Management 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 Ares Management Corp are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Ares Management i.e., Ares Management and Federal Agricultural go up and down completely randomly.
Pair Corralation between Ares Management and Federal Agricultural
Assuming the 90 days horizon Ares Management Corp is expected to generate 1.04 times more return on investment than Federal Agricultural. However, Ares Management is 1.04 times more volatile than Federal Agricultural Mortgage. It trades about 0.11 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of risk. If you would invest 12,458 in Ares Management Corp on September 25, 2024 and sell it today you would earn a total of 3,938 from holding Ares Management Corp or generate 31.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Ares Management Corp |
| Federal Agricultural |
Ares Management and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Federal Agricultural
The main advantage of trading using opposite Ares Management and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| Ares Management vs. Ubisoft Entertainment SA | Ares Management vs. Tencent Music Entertainment | Ares Management vs. GigaMedia | Ares Management vs. Sabra Health Care |
| Federal Agricultural vs. Vastned Retail NV | Federal Agricultural vs. Zoom Video Communications | Federal Agricultural vs. SUN ART RETAIL | Federal Agricultural vs. ECHO INVESTMENT ZY |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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