Correlation Between Ares Management and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Ares Management and Rio Tinto 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 Rio Tinto 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 Rio Tinto Group, you can compare the effects of market volatilities on Ares Management and Rio Tinto 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 Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Rio Tinto.
Diversification Opportunities for Ares Management and Rio Tinto
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ares and Rio is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of Ares Management i.e., Ares Management and Rio Tinto go up and down completely randomly.
Pair Corralation between Ares Management and Rio Tinto
Assuming the 90 days horizon Ares Management Corp is expected to generate 0.98 times more return on investment than Rio Tinto. However, Ares Management Corp is 1.02 times less risky than Rio Tinto. It trades about 0.12 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.01 per unit of risk. If you would invest 6,134 in Ares Management Corp on September 2, 2024 and sell it today you would earn a total of 10,318 from holding Ares Management Corp or generate 168.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. Rio Tinto Group
Performance |
| Timeline |
| Ares Management Corp |
| Rio Tinto Group |
Ares Management and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Rio Tinto
The main advantage of trading using opposite Ares Management and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Ares Management vs. Ameriprise Financial | Ares Management vs. Superior Plus Corp | Ares Management vs. NMI Holdings | Ares Management vs. Origin Agritech |
| Rio Tinto vs. BHP Group Limited | Rio Tinto vs. Rio Tinto Group | Rio Tinto vs. Vale SA | Rio Tinto vs. Vale SA |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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