Correlation Between NYSE Composite and Ares Capital
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Ares Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Ares Capital, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Ares Capital.
Diversification Opportunities for NYSE Composite and Ares Capital
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Ares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Ares Capital go up and down completely randomly.
Pair Corralation between NYSE Composite and Ares Capital
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.24 times less return on investment than Ares Capital. But when comparing it to its historical volatility, NYSE Composite is 1.26 times less risky than Ares Capital. It trades about 0.08 of its potential returns per unit of risk. Ares Capital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,652 in Ares Capital on August 27, 2024 and sell it today you would earn a total of 550.00 from holding Ares Capital or generate 33.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Ares Capital
Performance |
| Timeline |
NYSE Composite and Ares Capital Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Ares Capital
Pair trading matchups for Ares Capital
Pair Trading with NYSE Composite and Ares Capital
The main advantage of trading using opposite NYSE Composite and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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