Correlation Between Aquagold International and Ares Capital

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

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

Diversification Opportunities for Aquagold International and Ares Capital

-0.29

Correlation Coefficient

Aquagold International  Ares Capital

Very good diversification

The 3 months correlation between Aquagold and Ares is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Aquagold 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 Aquagold International are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Aquagold International i.e., Aquagold International and Ares Capital go up and down completely randomly.

Pair Corralation between Aquagold International and Ares Capital

Given the investment horizon of 90 days Aquagold International is expected to under-perform the Ares Capital. In addition to that, Aquagold International is 26.79 times more volatile than Ares Capital. It trades about -0.22 of its total potential returns per unit of risk. Ares Capital is currently generating about 0.12 per unit of volatility. If you would invest  2,153  in Ares Capital on September 28, 2024 and sell it today you would earn a total of  41.00  from holding Ares Capital or generate 1.9% return on investment over 90 days.

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

Aquagold International  vs.  Ares Capital

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ares Capital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Ares Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aquagold International and Ares Capital

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

The idea behind Aquagold International and Ares Capital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..