Correlation Between Ares Capital and Target Global
Can any of the company-specific risk be diversified away by investing in both Ares Capital and Target Global 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 Target Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and Target Global Acquisition, you can compare the effects of market volatilities on Ares Capital and Target Global 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 Target Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and Target Global.
Diversification Opportunities for Ares Capital and Target Global
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ares and Target is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Target Global Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Global Acquisition 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 Target Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Global Acquisition has no effect on the direction of Ares Capital i.e., Ares Capital and Target Global go up and down completely randomly.
Pair Corralation between Ares Capital and Target Global
Given the investment horizon of 90 days Ares Capital is expected to generate 1.5 times more return on investment than Target Global. However, Ares Capital is 1.5 times more volatile than Target Global Acquisition. It trades about 0.08 of its potential returns per unit of risk. Target Global Acquisition is currently generating about 0.04 per unit of risk. If you would invest 1,555 in Ares Capital on August 29, 2024 and sell it today you would earn a total of 646.00 from holding Ares Capital or generate 41.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. Target Global Acquisition
Performance |
| Timeline |
| Ares Capital |
| Target Global Acquisition |
Ares Capital and Target Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and Target Global
The main advantage of trading using opposite Ares Capital and Target Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, Target Global 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 Target Global will offset losses from the drop in Target Global's long position.The idea behind Ares Capital and Target Global Acquisition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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