Correlation Between Ares Management and British American
Can any of the company-specific risk be diversified away by investing in both Ares Management and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Ares Management and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and British American.
Diversification Opportunities for Ares Management and British American
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ares and British is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Ares Management i.e., Ares Management and British American go up and down completely randomly.
Pair Corralation between Ares Management and British American
Assuming the 90 days horizon Ares Management Corp is expected to generate 1.8 times more return on investment than British American. However, Ares Management is 1.8 times more volatile than British American Tobacco. It trades about 0.21 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.07 per unit of risk. If you would invest 17,424 in Ares Management Corp on October 25, 2024 and sell it today you would earn a total of 1,232 from holding Ares Management Corp or generate 7.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. British American Tobacco
Performance |
| Timeline |
| Ares Management Corp |
| British American Tobacco |
Ares Management and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and British American
The main advantage of trading using opposite Ares Management and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Ares Management vs. Blackstone Group | Ares Management vs. The Bank of | Ares Management vs. Ameriprise Financial | Ares Management vs. State Street |
| British American vs. Tsingtao Brewery | British American vs. Tokyu Construction Co | British American vs. North American Construction | British American vs. FARM 51 GROUP |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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