Correlation Between Ares Management and Salesforce

Can any of the company-specific risk be diversified away by investing in both Ares Management and Salesforce 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 Salesforce 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 Salesforce, you can compare the effects of market volatilities on Ares Management and Salesforce 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 Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Salesforce.

Diversification Opportunities for Ares Management and Salesforce

0.92

Correlation Coefficient

Ares Management  Salesforce

Almost no diversification

The 3 months correlation between Ares and Salesforce is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Ares Management i.e., Ares Management and Salesforce go up and down completely randomly.

Pair Corralation between Ares Management and Salesforce

Assuming the 90 days horizon Ares Management is expected to generate 2.0 times less return on investment than Salesforce. In addition to that, Ares Management is 1.01 times more volatile than Salesforce. It trades about 0.12 of its total potential returns per unit of risk. Salesforce is currently generating about 0.24 per unit of volatility. If you would invest  23,577  in Salesforce on September 23, 2024 and sell it today you would earn a total of  9,553  from holding Salesforce or generate 40.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Ares Management Corp  vs.  Salesforce

Ares Management Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 9 (%) 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.

Salesforce

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and Salesforce

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

The idea behind Ares Management Corp and Salesforce 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.