Correlation Between Ares Management and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Ares Management and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management and Automatic Data Processing, you can compare the effects of market volatilities on Ares Management and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Automatic Data.
Diversification Opportunities for Ares Management and Automatic Data
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ares and Automatic is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Ares Management i.e., Ares Management and Automatic Data go up and down completely randomly.
Pair Corralation between Ares Management and Automatic Data
Assuming the 90 days trading horizon Ares Management is expected to generate 1.68 times more return on investment than Automatic Data. However, Ares Management is 1.68 times more volatile than Automatic Data Processing. It trades about -0.02 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.16 per unit of risk. If you would invest 10,985 in Ares Management on October 13, 2024 and sell it today you would lose (93.00) from holding Ares Management or give up 0.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
Ares Management vs. Automatic Data Processing
Performance |
| Timeline |
| Ares Management |
| Automatic Data Processing |
Ares Management and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Automatic Data
The main advantage of trading using opposite Ares Management and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Ares Management vs. Verizon Communications | Ares Management vs. Bemobi Mobile Tech | Ares Management vs. Take Two Interactive Software | Ares Management vs. Guidewire Software, |
| Automatic Data vs. Energisa SA | Automatic Data vs. BTG Pactual Logstica | Automatic Data vs. Plano Plano Desenvolvimento | Automatic Data vs. Ares 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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