Correlation Between Ares International and Sysage Technology
Can any of the company-specific risk be diversified away by investing in both Ares International and Sysage Technology 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 International and Sysage Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares International Corp and Sysage Technology Co, you can compare the effects of market volatilities on Ares International and Sysage Technology 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 International with a short position of Sysage Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares International and Sysage Technology.
Diversification Opportunities for Ares International and Sysage Technology
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Sysage is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ares International Corp and Sysage Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sysage Technology and Ares International 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 International Corp are associated (or correlated) with Sysage Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sysage Technology has no effect on the direction of Ares International i.e., Ares International and Sysage Technology go up and down completely randomly.
Pair Corralation between Ares International and Sysage Technology
Assuming the 90 days trading horizon Ares International Corp is expected to under-perform the Sysage Technology. But the stock apears to be less risky and, when comparing its historical volatility, Ares International Corp is 2.03 times less risky than Sysage Technology. The stock trades about -0.15 of its potential returns per unit of risk. The Sysage Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,895 in Sysage Technology Co on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Sysage Technology Co or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares International Corp vs. Sysage Technology Co
Performance |
| Timeline |
| Ares International Corp |
| Sysage Technology |
Ares International and Sysage Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares International and Sysage Technology
The main advantage of trading using opposite Ares International and Sysage Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares International position performs unexpectedly, Sysage Technology 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 Sysage Technology will offset losses from the drop in Sysage Technology's long position.The idea behind Ares International Corp and Sysage Technology Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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