Correlation Between Ares Management and TOREX SEMICONDUCTOR

Can any of the company-specific risk be diversified away by investing in both Ares Management and TOREX SEMICONDUCTOR 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 Ares Management and TOREX SEMICONDUCTOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ares Management Corp and TOREX SEMICONDUCTOR LTD, you can compare the effects of market volatilities on Ares Management and TOREX SEMICONDUCTOR 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 Ares Management with a short position of TOREX SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and TOREX SEMICONDUCTOR.

Diversification Opportunities for Ares Management and TOREX SEMICONDUCTOR

-0.89

Correlation Coefficient

Ares Management  TOREX SEMICONDUCTOR

Pay attention - limited upside

The 3 months correlation between Ares and TOREX is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and TOREX SEMICONDUCTOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOREX SEMICONDUCTOR LTD and Ares Management 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 Ares Management Corp are associated (or correlated) with TOREX SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOREX SEMICONDUCTOR LTD has no effect on the direction of Ares Management i.e., Ares Management and TOREX SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Ares Management and TOREX SEMICONDUCTOR

Assuming the 90 days horizon Ares Management Corp is expected to generate 1.18 times more return on investment than TOREX SEMICONDUCTOR. However, Ares Management is 1.18 times more volatile than TOREX SEMICONDUCTOR LTD. It trades about 0.08 of its potential returns per unit of risk. TOREX SEMICONDUCTOR LTD is currently generating about -0.25 per unit of risk. If you would invest  15,715  in Ares Management Corp on September 26, 2024 and sell it today you would earn a total of  1,215  from holding Ares Management Corp or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ares Management Corp  vs.  TOREX SEMICONDUCTOR LTD

Ares Management Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ares Management reported solid returns over the last few months and may actually be approaching a breakup point.

TOREX SEMICONDUCTOR LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOREX SEMICONDUCTOR LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ares Management and TOREX SEMICONDUCTOR

The main advantage of trading using opposite Ares Management and TOREX SEMICONDUCTOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR will offset losses from the drop in TOREX SEMICONDUCTOR's long position.

The idea behind Ares Management Corp and TOREX SEMICONDUCTOR LTD 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.