Correlation Between Ares Management and China DatangRenewable
Can any of the company-specific risk be diversified away by investing in both Ares Management and China DatangRenewable 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 China DatangRenewable 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 China Datang, you can compare the effects of market volatilities on Ares Management and China DatangRenewable 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 China DatangRenewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and China DatangRenewable.
Diversification Opportunities for Ares Management and China DatangRenewable
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ares and China is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China DatangRenewable 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 China DatangRenewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China DatangRenewable has no effect on the direction of Ares Management i.e., Ares Management and China DatangRenewable go up and down completely randomly.
Pair Corralation between Ares Management and China DatangRenewable
Assuming the 90 days horizon Ares Management Corp is expected to generate 0.41 times more return on investment than China DatangRenewable. However, Ares Management Corp is 2.46 times less risky than China DatangRenewable. It trades about 0.11 of its potential returns per unit of risk. China Datang is currently generating about 0.04 per unit of risk. If you would invest 7,280 in Ares Management Corp on November 9, 2024 and sell it today you would earn a total of 11,294 from holding Ares Management Corp or generate 155.14% 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. China Datang
Performance |
| Timeline |
| Ares Management Corp |
| China DatangRenewable |
Ares Management and China DatangRenewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and China DatangRenewable
The main advantage of trading using opposite Ares Management and China DatangRenewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, China DatangRenewable 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 China DatangRenewable will offset losses from the drop in China DatangRenewable's long position.| Ares Management vs. Darden Restaurants | Ares Management vs. Erste Group Bank | Ares Management vs. ETFS Coffee ETC | Ares Management vs. NORTHEAST UTILITIES |
| China DatangRenewable vs. Chunghwa Telecom Co | China DatangRenewable vs. New Residential Investment | China DatangRenewable vs. Japan Asia Investment | China DatangRenewable vs. Ribbon Communications |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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