Correlation Between Main Street and Ares Management
Can any of the company-specific risk be diversified away by investing in both Main Street 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 Main Street and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Street Capital and Ares Management LP, you can compare the effects of market volatilities on Main Street 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 Main Street with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Ares Management.
Diversification Opportunities for Main Street and Ares Management
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and Ares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Ares Management LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management LP and Main Street 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 Main Street Capital 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 LP has no effect on the direction of Main Street i.e., Main Street and Ares Management go up and down completely randomly.
Pair Corralation between Main Street and Ares Management
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.49 times more return on investment than Ares Management. However, Main Street Capital is 2.06 times less risky than Ares Management. It trades about 0.22 of its potential returns per unit of risk. Ares Management LP is currently generating about 0.08 per unit of risk. If you would invest 5,178 in Main Street Capital on August 27, 2024 and sell it today you would earn a total of 219.00 from holding Main Street Capital or generate 4.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. Ares Management LP
Performance |
| Timeline |
| Main Street Capital |
| Ares Management LP |
Main Street and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Ares Management
The main advantage of trading using opposite Main Street and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
| Ares Management vs. KKR Co LP | Ares Management vs. Carlyle Group | Ares Management vs. Blackstone Group | Ares Management vs. Blue Owl 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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