Correlation Between Ares Capital and Royalty Management
Can any of the company-specific risk be diversified away by investing in both Ares Capital and Royalty 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 Ares Capital and Royalty Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and Royalty Management Holding, you can compare the effects of market volatilities on Ares Capital and Royalty 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 Ares Capital with a short position of Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and Royalty Management.
Diversification Opportunities for Ares Capital and Royalty Management
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Royalty is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management and Ares Capital 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 Capital are associated (or correlated) with Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Ares Capital i.e., Ares Capital and Royalty Management go up and down completely randomly.
Pair Corralation between Ares Capital and Royalty Management
Given the investment horizon of 90 days Ares Capital is expected to generate 0.1 times more return on investment than Royalty Management. However, Ares Capital is 9.91 times less risky than Royalty Management. It trades about 0.12 of its potential returns per unit of risk. Royalty Management Holding is currently generating about -0.03 per unit of risk. If you would invest 1,801 in Ares Capital on August 31, 2024 and sell it today you would earn a total of 400.00 from holding Ares Capital or generate 22.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. Royalty Management Holding
Performance |
| Timeline |
| Ares Capital |
| Royalty Management |
Ares Capital and Royalty Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and Royalty Management
The main advantage of trading using opposite Ares Capital and Royalty Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, Royalty 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 Royalty Management will offset losses from the drop in Royalty Management's long position.| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
| Royalty Management vs. Ares Capital | Royalty Management vs. Hercules Capital | Royalty Management vs. Main Street Capital |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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