Correlation Between GMO Internet and Ares Management
Can any of the company-specific risk be diversified away by investing in both GMO Internet and Ares Management 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 GMO Internet and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and Ares Management Corp, you can compare the effects of market volatilities on GMO Internet and Ares Management 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 GMO Internet with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Ares Management.
Diversification Opportunities for GMO Internet and Ares Management
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMO and Ares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp and GMO Internet 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 GMO Internet are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of GMO Internet i.e., GMO Internet and Ares Management go up and down completely randomly.
Pair Corralation between GMO Internet and Ares Management
Assuming the 90 days horizon GMO Internet is expected to under-perform the Ares Management. But the stock apears to be less risky and, when comparing its historical volatility, GMO Internet is 1.48 times less risky than Ares Management. The stock trades about -0.19 of its potential returns per unit of risk. The Ares Management Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 17,404 in Ares Management Corp on October 12, 2024 and sell it today you would lose (204.00) from holding Ares Management Corp or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMO Internet vs. Ares Management Corp
Performance |
| Timeline |
| GMO Internet |
| Ares Management Corp |
GMO Internet and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMO Internet and Ares Management
The main advantage of trading using opposite GMO Internet and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet position performs unexpectedly, Ares Management 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 Management will offset losses from the drop in Ares Management's long position.| GMO Internet vs. GALENA MINING LTD | GMO Internet vs. Addtech AB | GMO Internet vs. Agilent Technologies | GMO Internet vs. GRIFFIN MINING LTD |
| Ares Management vs. Caseys General Stores | Ares Management vs. BURLINGTON STORES | Ares Management vs. PACIFIC ONLINE | Ares Management vs. Fast Retailing Co |
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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