Correlation Between United Utilities and Ares Management
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Ares Management Corp, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Ares Management.
Diversification Opportunities for United Utilities and Ares Management
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Ares is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group 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 United Utilities 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 United Utilities Group 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 United Utilities i.e., United Utilities and Ares Management go up and down completely randomly.
Pair Corralation between United Utilities and Ares Management
Assuming the 90 days trading horizon United Utilities is expected to generate 1.75 times less return on investment than Ares Management. But when comparing it to its historical volatility, United Utilities Group is 1.98 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 0.11 of returns per unit of risk over similar time horizon. If you would invest 15,502 in Ares Management Corp on August 25, 2024 and sell it today you would earn a total of 1,000.00 from holding Ares Management Corp or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Ares Management Corp
Performance |
| Timeline |
| United Utilities |
| Ares Management Corp |
United Utilities and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Ares Management
The main advantage of trading using opposite United Utilities and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.The idea behind United Utilities Group and Ares Management Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Ares Management vs. Soken Chemical Engineering | Ares Management vs. NTG Nordic Transport | Ares Management vs. Air Transport Services | Ares Management vs. Sanyo Chemical Industries |
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 Positions Ratings module to 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.
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