Correlation Between Ares Management and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Ares Management and Procter Gamble 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 Procter Gamble 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 Procter Gamble, you can compare the effects of market volatilities on Ares Management and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Procter Gamble.
Diversification Opportunities for Ares Management and Procter Gamble
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Procter is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Ares Management i.e., Ares Management and Procter Gamble go up and down completely randomly.
Pair Corralation between Ares Management and Procter Gamble
Assuming the 90 days trading horizon Ares Management is expected to generate 0.79 times more return on investment than Procter Gamble. However, Ares Management is 1.27 times less risky than Procter Gamble. It trades about 0.21 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.07 per unit of risk. If you would invest 9,868 in Ares Management on October 12, 2024 and sell it today you would earn a total of 1,284 from holding Ares Management or generate 13.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management vs. The Procter Gamble
Performance |
| Timeline |
| Ares Management |
| Procter Gamble |
Ares Management and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Procter Gamble
The main advantage of trading using opposite Ares Management and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble'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, |
| Procter Gamble vs. Unity Software | Procter Gamble vs. MAHLE Metal Leve | Procter Gamble vs. Darden Restaurants, | Procter Gamble vs. TAL Education Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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