Correlation Between Ares Management and Blue Owl

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

Diversification Opportunities for Ares Management and Blue Owl

0.98

Correlation Coefficient

Ares Management  Blue Owl

Almost no diversification

The 3 months correlation between Ares and Blue is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Blue Owl Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Owl Capital 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 Blue Owl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Owl Capital has no effect on the direction of Ares Management i.e., Ares Management and Blue Owl go up and down completely randomly.

Pair Corralation between Ares Management and Blue Owl

Given the investment horizon of 90 days Ares Management is expected to generate 1.51 times less return on investment than Blue Owl. But when comparing it to its historical volatility, Ares Management LP is 1.32 times less risky than Blue Owl. It trades about 0.22 of its potential returns per unit of risk. Blue Owl Capital is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,692  in Blue Owl Capital on September 1, 2024 and sell it today you would earn a total of  681.00  from holding Blue Owl Capital or generate 40.25% return on investment over 90 days.

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

Ares Management LP  vs.  Blue Owl Capital

Ares Management LP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 17 (%) 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.

Blue Owl Capital

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Owl Capital are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Blue Owl disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ares Management and Blue Owl

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

The idea behind Ares Management LP and Blue Owl 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.