Correlation Between Ares Management and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both Ares Management and CHINA HUARONG 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 CHINA HUARONG 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 CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Ares Management and CHINA HUARONG 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 CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and CHINA HUARONG.
Diversification Opportunities for Ares Management and CHINA HUARONG
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ares and CHINA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD 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 CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Ares Management i.e., Ares Management and CHINA HUARONG go up and down completely randomly.
Pair Corralation between Ares Management and CHINA HUARONG
Assuming the 90 days horizon Ares Management is expected to generate 8.64 times less return on investment than CHINA HUARONG. But when comparing it to its historical volatility, Ares Management Corp is 12.84 times less risky than CHINA HUARONG. It trades about 0.21 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.05 in CHINA HUARONG ENERHD 50 on September 14, 2024 and sell it today you would earn a total of 0.10 from holding CHINA HUARONG ENERHD 50 or generate 200.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ares Management Corp vs. CHINA HUARONG ENERHD 50
Performance |
Timeline |
Ares Management Corp |
CHINA HUARONG ENERHD |
Ares Management and CHINA HUARONG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ares Management and CHINA HUARONG
The main advantage of trading using opposite Ares Management and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, CHINA HUARONG 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 CHINA HUARONG will offset losses from the drop in CHINA HUARONG's long position.Ares Management vs. Ameriprise Financial | Ares Management vs. Superior Plus Corp | Ares Management vs. SIVERS SEMICONDUCTORS AB | Ares Management vs. CHINA HUARONG ENERHD 50 |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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