Correlation Between Ares Management and Microsoft
Can any of the company-specific risk be diversified away by investing in both Ares Management and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Ares Management and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Microsoft.
Diversification Opportunities for Ares Management and Microsoft
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and Microsoft is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Ares Management i.e., Ares Management and Microsoft go up and down completely randomly.
Pair Corralation between Ares Management and Microsoft
Assuming the 90 days horizon Ares Management Corp is expected to under-perform the Microsoft. In addition to that, Ares Management is 1.38 times more volatile than Microsoft. It trades about -0.05 of its total potential returns per unit of risk. Microsoft is currently generating about 0.17 per unit of volatility. If you would invest 39,910 in Microsoft on September 24, 2024 and sell it today you would earn a total of 1,805 from holding Microsoft or generate 4.52% 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. Microsoft
Performance |
| Timeline |
| Ares Management Corp |
| Microsoft |
Ares Management and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Microsoft
The main advantage of trading using opposite Ares Management and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Ares Management vs. Blackstone Group | Ares Management vs. The Bank of | Ares Management vs. Ameriprise Financial | Ares Management vs. State Street |
| Microsoft vs. Virtus Investment Partners | Microsoft vs. REINET INVESTMENTS SCA | Microsoft vs. Ares Management Corp | Microsoft vs. Cleanaway Waste Management |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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