Correlation Between Ares Management and North American
Can any of the company-specific risk be diversified away by investing in both Ares Management and North 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 North 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 North American Construction, you can compare the effects of market volatilities on Ares Management and North 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and North American.
Diversification Opportunities for Ares Management and North American
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ares and North is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Ares Management i.e., Ares Management and North American go up and down completely randomly.
Pair Corralation between Ares Management and North American
Assuming the 90 days horizon Ares Management Corp is expected to generate 0.61 times more return on investment than North American. However, Ares Management Corp is 1.64 times less risky than North American. It trades about 0.11 of its potential returns per unit of risk. North American Construction is currently generating about 0.02 per unit of risk. If you would invest 8,182 in Ares Management Corp on September 2, 2024 and sell it today you would earn a total of 8,270 from holding Ares Management Corp or generate 101.08% 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. North American Construction
Performance |
| Timeline |
| Ares Management Corp |
| North American Const |
Ares Management and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and North American
The main advantage of trading using opposite Ares Management and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, North 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 North American will offset losses from the drop in North American's long position.| Ares Management vs. Ameriprise Financial | Ares Management vs. Superior Plus Corp | Ares Management vs. NMI Holdings | Ares Management vs. Origin Agritech |
| North American vs. Tenaris SA | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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