Correlation Between Northern Trust and Ares Management
Can any of the company-specific risk be diversified away by investing in both Northern Trust 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 Northern Trust and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Trust and Ares Management Corp, you can compare the effects of market volatilities on Northern Trust 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 Northern Trust with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Trust and Ares Management.
Diversification Opportunities for Northern Trust and Ares Management
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Ares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Northern Trust 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 Northern Trust 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 Northern Trust 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 Northern Trust i.e., Northern Trust and Ares Management go up and down completely randomly.
Pair Corralation between Northern Trust and Ares Management
Assuming the 90 days horizon Northern Trust is expected to generate 1.13 times less return on investment than Ares Management. But when comparing it to its historical volatility, Northern Trust is 1.27 times less risky than Ares Management. It trades about 0.13 of its potential returns per unit of risk. Ares Management Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,677 in Ares Management Corp on September 1, 2024 and sell it today you would earn a total of 6,957 from holding Ares Management Corp or generate 71.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.64% |
| Values | Daily Returns |
Northern Trust vs. Ares Management Corp
Performance |
| Timeline |
| Northern Trust |
| Ares Management Corp |
Northern Trust and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Trust and Ares Management
The main advantage of trading using opposite Northern Trust and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Trust 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.| Northern Trust vs. YOOMA WELLNESS INC | Northern Trust vs. AOYAMA TRADING | Northern Trust vs. Sabra Health Care | Northern Trust vs. MGIC INVESTMENT |
| Ares Management vs. MAGIC SOFTWARE ENTR | Ares Management vs. CAREER EDUCATION | Ares Management vs. ATOSS SOFTWARE | Ares Management vs. CPU SOFTWAREHOUSE |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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