Correlation Between Ariel Fund and Ariel Focus

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

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

Diversification Opportunities for Ariel Fund and Ariel Focus

0.8

Correlation Coefficient

Ariel Fund  Ariel Focus

Very poor diversification

The 3 months correlation between Ariel and Ariel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Fund Institutional and Ariel Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Focus Fund and Ariel Fund 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 Fund Institutional are associated (or correlated) with Ariel Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Focus Fund has no effect on the direction of Ariel Fund i.e., Ariel Fund and Ariel Focus go up and down completely randomly.

Pair Corralation between Ariel Fund and Ariel Focus

Assuming the 90 days horizon Ariel Fund Institutional is expected to generate 1.08 times more return on investment than Ariel Focus. However, Ariel Fund is 1.08 times more volatile than Ariel Focus Fund. It trades about 0.17 of its potential returns per unit of risk. Ariel Focus Fund is currently generating about 0.16 per unit of risk. If you would invest  7,278  in Ariel Fund Institutional on September 12, 2024 and sell it today you would earn a total of  821.00  from holding Ariel Fund Institutional or generate 11.28% return on investment over 90 days.

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

Ariel Fund Institutional  vs.  Ariel Focus Fund

Ariel Fund Institutional

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Ariel Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Ariel Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ariel Focus Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Focus Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel Focus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ariel Fund and Ariel Focus

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

The idea behind Ariel Fund Institutional and Ariel Focus 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.