Correlation Between Ares Management and Home Depot
Can any of the company-specific risk be diversified away by investing in both Ares Management and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management and The Home Depot, you can compare the effects of market volatilities on Ares Management and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Home Depot.
Diversification Opportunities for Ares Management and Home Depot
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Home is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Ares Management i.e., Ares Management and Home Depot go up and down completely randomly.
Pair Corralation between Ares Management and Home Depot
Assuming the 90 days trading horizon Ares Management is expected to generate 1.01 times more return on investment than Home Depot. However, Ares Management is 1.01 times more volatile than The Home Depot. It trades about -0.01 of its potential returns per unit of risk. The Home Depot is currently generating about -0.19 per unit of risk. If you would invest 10,951 in Ares Management on October 15, 2024 and sell it today you would lose (59.00) from holding Ares Management or give up 0.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management vs. The Home Depot
Performance |
| Timeline |
| Ares Management |
| Home Depot |
Ares Management and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Home Depot
The main advantage of trading using opposite Ares Management and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Ares Management vs. Taiwan Semiconductor Manufacturing | Ares Management vs. Apple Inc | Ares Management vs. Alibaba Group Holding | Ares Management vs. Banco Santander Chile |
| Home Depot vs. Ares Management | Home Depot vs. Tyson Foods | Home Depot vs. Capital One Financial | Home Depot vs. Marfrig Global Foods |
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 Stocks Directory module to find actively traded stocks across global markets.
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