Correlation Between Ares Capital and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Ares Capital and AB Volvo 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 AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and AB Volvo, you can compare the effects of market volatilities on Ares Capital and AB Volvo 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 AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and AB Volvo.
Diversification Opportunities for Ares Capital and AB Volvo
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ares and VOLAF is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Ares Capital i.e., Ares Capital and AB Volvo go up and down completely randomly.
Pair Corralation between Ares Capital and AB Volvo
Given the investment horizon of 90 days Ares Capital is expected to generate 0.8 times more return on investment than AB Volvo. However, Ares Capital is 1.25 times less risky than AB Volvo. It trades about 0.36 of its potential returns per unit of risk. AB Volvo is currently generating about -0.23 per unit of risk. If you would invest 2,114 in Ares Capital on September 1, 2024 and sell it today you would earn a total of 101.00 from holding Ares Capital or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. AB Volvo
Performance |
| Timeline |
| Ares Capital |
| AB Volvo |
Ares Capital and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and AB Volvo
The main advantage of trading using opposite Ares Capital and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo'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 |
| AB Volvo vs. Volvo AB ADR | AB Volvo vs. Deere Company | AB Volvo vs. Volvo AB ser | AB Volvo vs. Deutsche Post AG |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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