Correlation Between Ares Management and FT Cboe

Can any of the company-specific risk be diversified away by investing in both Ares Management and FT Cboe 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 FT Cboe 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 FT Cboe Vest, you can compare the effects of market volatilities on Ares Management and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and FT Cboe.

Diversification Opportunities for Ares Management and FT Cboe

-0.06

Correlation Coefficient

Ares Management  FT Cboe

Good diversification

The 3 months correlation between Ares and IGLD is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Ares Management i.e., Ares Management and FT Cboe go up and down completely randomly.

Pair Corralation between Ares Management and FT Cboe

Given the investment horizon of 90 days Ares Management LP is expected to generate 1.98 times more return on investment than FT Cboe. However, Ares Management is 1.98 times more volatile than FT Cboe Vest. It trades about 0.14 of its potential returns per unit of risk. FT Cboe Vest is currently generating about -0.02 per unit of risk. If you would invest  15,612  in Ares Management LP on September 27, 2024 and sell it today you would earn a total of  2,494  from holding Ares Management LP or generate 15.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ares Management LP  vs.  FT Cboe Vest

Ares Management LP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

FT Cboe Vest

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ares Management and FT Cboe

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

The idea behind Ares Management LP and FT Cboe Vest 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.