Correlation Between Ares Management and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Ares Management and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on Ares Management and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Norsk Hydro.
Diversification Opportunities for Ares Management and Norsk Hydro
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ares and Norsk is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Ares Management i.e., Ares Management and Norsk Hydro go up and down completely randomly.
Pair Corralation between Ares Management and Norsk Hydro
Assuming the 90 days horizon Ares Management Corp is expected to generate 1.55 times more return on investment than Norsk Hydro. However, Ares Management is 1.55 times more volatile than Norsk Hydro ASA. It trades about 0.01 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.23 per unit of risk. If you would invest 16,809 in Ares Management Corp on October 11, 2024 and sell it today you would earn a total of 21.00 from holding Ares Management Corp or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. Norsk Hydro ASA
Performance |
| Timeline |
| Ares Management Corp |
| Norsk Hydro ASA |
Ares Management and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Norsk Hydro
The main advantage of trading using opposite Ares Management and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Ares Management vs. PLAYMATES TOYS | Ares Management vs. Penn National Gaming | Ares Management vs. GigaMedia | Ares Management vs. China Eastern Airlines |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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