Correlation Between North American and Ares Management
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Ares Management Corp, you can compare the effects of market volatilities on North American 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 North American with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Ares Management.
Diversification Opportunities for North American and Ares Management
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and Ares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and Ares Management go up and down completely randomly.
Pair Corralation between North American and Ares Management
Assuming the 90 days horizon North American is expected to generate 1.75 times less return on investment than Ares Management. In addition to that, North American is 1.21 times more volatile than Ares Management Corp. It trades about 0.05 of its total potential returns per unit of risk. Ares Management Corp is currently generating about 0.11 per unit of volatility. If you would invest 12,458 in Ares Management Corp on September 25, 2024 and sell it today you would earn a total of 3,938 from holding Ares Management Corp or generate 31.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Ares Management Corp
Performance |
| Timeline |
| North American Const |
| Ares Management Corp |
North American and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Ares Management
The main advantage of trading using opposite North American and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Avanos Medical | North American vs. Tsingtao Brewery | North American vs. ONWARD MEDICAL BV | North American vs. Zijin Mining Group |
| Ares Management vs. Ubisoft Entertainment SA | Ares Management vs. Tencent Music Entertainment | Ares Management vs. GigaMedia | Ares Management vs. Sabra Health Care |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |