Correlation Between Ariel International and Ariel Appreciation

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

By analyzing existing cross correlation between Ariel International Fund and Ariel Appreciation Fund, you can compare the effects of market volatilities on Ariel International and Ariel Appreciation 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 Ariel International with a short position of Ariel Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel International and Ariel Appreciation.

Diversification Opportunities for Ariel International and Ariel Appreciation

-0.7

Correlation Coefficient

Ariel International  Ariel Appreciation

Excellent diversification

The 3 months correlation between Ariel and Ariel is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ariel International Fund and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation and Ariel International 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 Ariel International Fund are associated (or correlated) with Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Ariel International i.e., Ariel International and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Ariel International and Ariel Appreciation

Assuming the 90 days horizon Ariel International Fund is expected to under-perform the Ariel Appreciation. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ariel International Fund is 1.29 times less risky than Ariel Appreciation. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Ariel Appreciation Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,054  in Ariel Appreciation Fund on September 13, 2024 and sell it today you would earn a total of  357.00  from holding Ariel Appreciation Fund or generate 8.81% return on investment over 90 days.

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

Ariel International Fund  vs.  Ariel Appreciation Fund

Ariel International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ariel International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ariel International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel Appreciation

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Appreciation Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ariel Appreciation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ariel International and Ariel Appreciation

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

The idea behind Ariel International Fund and Ariel Appreciation Fund 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..