Correlation Between Ares Management and Principal Financial
Can any of the company-specific risk be diversified away by investing in both Ares Management and Principal Financial 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 Management and Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management LP and Principal Financial Group, you can compare the effects of market volatilities on Ares Management and Principal Financial 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 Management with a short position of Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Principal Financial.
Diversification Opportunities for Ares Management and Principal Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Principal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and Ares Management 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 Management LP are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Ares Management i.e., Ares Management and Principal Financial go up and down completely randomly.
Pair Corralation between Ares Management and Principal Financial
Given the investment horizon of 90 days Ares Management LP is expected to generate 1.18 times more return on investment than Principal Financial. However, Ares Management is 1.18 times more volatile than Principal Financial Group. It trades about 0.12 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.01 per unit of risk. If you would invest 6,505 in Ares Management LP on August 30, 2024 and sell it today you would earn a total of 10,973 from holding Ares Management LP or generate 168.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management LP vs. Principal Financial Group
Performance |
| Timeline |
| Ares Management LP |
| Principal Financial |
Ares Management and Principal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Principal Financial
The main advantage of trading using opposite Ares Management and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Principal Financial 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 Principal Financial will offset losses from the drop in Principal Financial's long position.| Ares Management vs. TPG Inc | Ares Management vs. Carlyle Secured Lending | Ares Management vs. Brookfield Corp |
| Principal Financial vs. State Street Corp | Principal Financial vs. Bank of New | Principal Financial vs. SEI Investments | Principal Financial vs. Affiliated Managers Group |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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