Correlation Between Blackrock Enhanced and Ares Management

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

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

Diversification Opportunities for Blackrock Enhanced and Ares Management

0.9

Correlation Coefficient

Blackrock Enhanced  Ares Management

Almost no diversification

The 3 months correlation between Blackrock and Ares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Equity and Ares Management LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management LP and Blackrock Enhanced 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 Blackrock Enhanced Equity are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management LP has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Ares Management go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Ares Management

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 5.33 times less return on investment than Ares Management. But when comparing it to its historical volatility, Blackrock Enhanced Equity is 2.09 times less risky than Ares Management. It trades about 0.05 of its potential returns per unit of risk. Ares Management LP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,544  in Ares Management LP on September 5, 2024 and sell it today you would earn a total of  10,961  from holding Ares Management LP or generate 167.5% return on investment over 90 days.

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

Blackrock Enhanced Equity  vs.  Ares Management LP

Blackrock Enhanced Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively fragile fundamental indicators, Blackrock Enhanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 abnormal technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackrock Enhanced and Ares Management

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

The idea behind Blackrock Enhanced Equity and Ares Management LP 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.