Correlation Between EQT AB and Ares Management

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

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

Diversification Opportunities for EQT AB and Ares Management

-0.55

Correlation Coefficient

EQT AB  Ares Management

Excellent diversification

The 3 months correlation between EQT and Ares is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding EQT AB 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 EQT AB 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 EQT AB 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 EQT AB i.e., EQT AB and Ares Management go up and down completely randomly.

Pair Corralation between EQT AB and Ares Management

Assuming the 90 days horizon EQT AB is expected to generate 3.43 times less return on investment than Ares Management. But when comparing it to its historical volatility, EQT AB is 1.02 times less risky than Ares Management. It trades about 0.06 of its potential returns per unit of risk. Ares Management Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  12,670  in Ares Management Corp on September 4, 2024 and sell it today you would earn a total of  3,782  from holding Ares Management Corp or generate 29.85% return on investment over 90 days.

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

EQT AB  vs.  Ares Management Corp

EQT AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EQT AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EQT AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ares Management Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 15 (%) 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.

Pair Trading with EQT AB and Ares Management

The main advantage of trading using opposite EQT AB and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQT AB 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.

The idea behind EQT AB and Ares Management Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.