Correlation Between Cornerstone Strategic and Ares Capital
Can any of the company-specific risk be diversified away by investing in both Cornerstone Strategic and Ares 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 Cornerstone Strategic and Ares Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cornerstone Strategic Return and Ares Capital, you can compare the effects of market volatilities on Cornerstone Strategic and Ares 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 Cornerstone Strategic with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornerstone Strategic and Ares Capital.
Diversification Opportunities for Cornerstone Strategic and Ares Capital
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cornerstone and Ares is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Strategic Return and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Cornerstone Strategic 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 Cornerstone Strategic Return are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Cornerstone Strategic i.e., Cornerstone Strategic and Ares Capital go up and down completely randomly.
Pair Corralation between Cornerstone Strategic and Ares Capital
Considering the 90-day investment horizon Cornerstone Strategic is expected to generate 2.19 times less return on investment than Ares Capital. In addition to that, Cornerstone Strategic is 1.33 times more volatile than Ares Capital. It trades about 0.15 of its total potential returns per unit of risk. Ares Capital is currently generating about 0.43 per unit of volatility. If you would invest 2,189 in Ares Capital on November 1, 2024 and sell it today you would earn a total of 152.00 from holding Ares Capital or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cornerstone Strategic Return vs. Ares Capital
Performance |
| Timeline |
| Cornerstone Strategic |
| Ares Capital |
Cornerstone Strategic and Ares Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cornerstone Strategic and Ares Capital
The main advantage of trading using opposite Cornerstone Strategic and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornerstone Strategic position performs unexpectedly, Ares 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 Ares Capital will offset losses from the drop in Ares Capital's long position.The idea behind Cornerstone Strategic Return and Ares Capital 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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