Correlation Between Federal Agricultural and Ares Management
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and Ares Management 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 Federal Agricultural and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and Ares Management Corp, you can compare the effects of market volatilities on Federal Agricultural and Ares Management 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 Federal Agricultural with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Ares Management.
Diversification Opportunities for Federal Agricultural and Ares Management
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and Ares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp and Federal Agricultural 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 Federal Agricultural Mortgage are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Ares Management go up and down completely randomly.
Pair Corralation between Federal Agricultural and Ares Management
Assuming the 90 days horizon Federal Agricultural is expected to generate 1.61 times less return on investment than Ares Management. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 1.04 times less risky than Ares Management. It trades about 0.07 of its potential returns per unit of risk. Ares Management Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 12,458 in Ares Management Corp on September 25, 2024 and sell it today you would earn a total of 3,938 from holding Ares Management Corp or generate 31.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Ares Management Corp
Performance |
| Timeline |
| Federal Agricultural |
| Ares Management Corp |
Federal Agricultural and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Ares Management
The main advantage of trading using opposite Federal Agricultural and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, Ares Management 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 Ares Management will offset losses from the drop in Ares Management's long position.| Federal Agricultural vs. Vastned Retail NV | Federal Agricultural vs. Zoom Video Communications | Federal Agricultural vs. SUN ART RETAIL | Federal Agricultural vs. ECHO INVESTMENT ZY |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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