Correlation Between Carsales and Ares Management
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Ares Management Corp, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Ares Management.
Diversification Opportunities for Carsales and Ares Management
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carsales and Ares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom 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 Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and Ares Management go up and down completely randomly.
Pair Corralation between Carsales and Ares Management
Assuming the 90 days horizon CarsalesCom is expected to generate 0.45 times more return on investment than Ares Management. However, CarsalesCom is 2.2 times less risky than Ares Management. It trades about 0.35 of its potential returns per unit of risk. Ares Management Corp is currently generating about 0.13 per unit of risk. If you would invest 2,240 in CarsalesCom on August 29, 2024 and sell it today you would earn a total of 240.00 from holding CarsalesCom or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Ares Management Corp
Performance |
| Timeline |
| CarsalesCom |
| Ares Management Corp |
Carsales and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Ares Management
The main advantage of trading using opposite Carsales and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. CapitaLand Investment Limited | Carsales vs. Genco Shipping Trading | Carsales vs. MGIC INVESTMENT | Carsales vs. WisdomTree Investments |
| Ares Management vs. Superior Plus Corp | Ares Management vs. NMI Holdings | Ares Management vs. Origin Agritech | Ares Management vs. SIVERS SEMICONDUCTORS AB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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