Correlation Between Ares Management and BlackRock MIT

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

By analyzing existing cross correlation between Ares Management LP and BlackRock MIT II, you can compare the effects of market volatilities on Ares Management and BlackRock MIT 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 BlackRock MIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and BlackRock MIT.

Diversification Opportunities for Ares Management and BlackRock MIT

-0.51

Correlation Coefficient

Ares Management  BlackRock MIT

Excellent diversification

The 3 months correlation between Ares and BlackRock is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and BlackRock MIT II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock MIT II 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 LP are associated (or correlated) with BlackRock MIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock MIT II has no effect on the direction of Ares Management i.e., Ares Management and BlackRock MIT go up and down completely randomly.

Pair Corralation between Ares Management and BlackRock MIT

Given the investment horizon of 90 days Ares Management LP is expected to generate 2.56 times more return on investment than BlackRock MIT. However, Ares Management is 2.56 times more volatile than BlackRock MIT II. It trades about 0.21 of its potential returns per unit of risk. BlackRock MIT II is currently generating about 0.14 per unit of risk. If you would invest  17,138  in Ares Management LP on September 12, 2024 and sell it today you would earn a total of  1,104  from holding Ares Management LP or generate 6.44% return on investment over 90 days.

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

Ares Management LP  vs.  BlackRock MIT II

Ares Management LP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

BlackRock MIT II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock MIT II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, BlackRock MIT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ares Management and BlackRock MIT

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

The idea behind Ares Management LP and BlackRock MIT II 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.