Correlation Between Ares Management and Internet Thailand

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

Diversification Opportunities for Ares Management and Internet Thailand

0.72

Correlation Coefficient

Ares Management  Internet Thailand

Poor diversification

The 3 months correlation between Ares and Internet is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Internet Thailand PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Internet Thailand PCL 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 Internet Thailand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Internet Thailand PCL has no effect on the direction of Ares Management i.e., Ares Management and Internet Thailand go up and down completely randomly.

Pair Corralation between Ares Management and Internet Thailand

Assuming the 90 days horizon Ares Management is expected to generate 1.7 times less return on investment than Internet Thailand. But when comparing it to its historical volatility, Ares Management Corp is 2.26 times less risky than Internet Thailand. It trades about 0.15 of its potential returns per unit of risk. Internet Thailand PCL is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Internet Thailand PCL on September 20, 2024 and sell it today you would earn a total of  4.00  from holding Internet Thailand PCL or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Ares Management Corp  vs.  Internet Thailand PCL

Ares Management Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 11 (%) 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.

Internet Thailand PCL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Internet Thailand PCL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Internet Thailand unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and Internet Thailand

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

The idea behind Ares Management Corp and Internet Thailand PCL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.