Correlation Between Ares Capital and Trinity Capital
Can any of the company-specific risk be diversified away by investing in both Ares Capital and Trinity Capital 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 Trinity Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and Trinity Capital, you can compare the effects of market volatilities on Ares Capital and Trinity Capital 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 Trinity Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and Trinity Capital.
Diversification Opportunities for Ares Capital and Trinity Capital
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Trinity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Trinity Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity Capital 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 Trinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Capital has no effect on the direction of Ares Capital i.e., Ares Capital and Trinity Capital go up and down completely randomly.
Pair Corralation between Ares Capital and Trinity Capital
Given the investment horizon of 90 days Ares Capital is expected to generate 1.97 times less return on investment than Trinity Capital. But when comparing it to its historical volatility, Ares Capital is 1.74 times less risky than Trinity Capital. It trades about 0.07 of its potential returns per unit of risk. Trinity Capital is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 771.00 in Trinity Capital on August 24, 2024 and sell it today you would earn a total of 655.00 from holding Trinity Capital or generate 84.95% 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. Trinity Capital
Performance |
| Timeline |
| Ares Capital |
| Trinity Capital |
Ares Capital and Trinity Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and Trinity Capital
The main advantage of trading using opposite Ares Capital and Trinity Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, Trinity Capital 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 Trinity Capital will offset losses from the drop in Trinity Capital'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 |
| Trinity Capital vs. Carlyle Secured Lending | Trinity Capital vs. Sixth Street Specialty | Trinity Capital vs. Hercules Capital | Trinity Capital vs. BlackRock TCP 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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