Correlation Between Carlyle Secured and Ares Capital

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

By analyzing existing cross correlation between Carlyle Secured Lending and Ares Capital, you can compare the effects of market volatilities on Carlyle Secured and Ares Capital 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 Carlyle Secured with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle Secured and Ares Capital.

Diversification Opportunities for Carlyle Secured and Ares Capital

0.39

Correlation Coefficient

Carlyle Secured  Ares Capital

Weak diversification

The 3 months correlation between Carlyle and Ares is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Secured Lending and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Carlyle Secured 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 Carlyle Secured Lending are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Carlyle Secured i.e., Carlyle Secured and Ares Capital go up and down completely randomly.

Pair Corralation between Carlyle Secured and Ares Capital

Given the investment horizon of 90 days Carlyle Secured Lending is expected to generate 1.44 times more return on investment than Ares Capital. However, Carlyle Secured is 1.44 times more volatile than Ares Capital. It trades about 0.12 of its potential returns per unit of risk. Ares Capital is currently generating about 0.16 per unit of risk. If you would invest  1,684  in Carlyle Secured Lending on September 25, 2024 and sell it today you would earn a total of  116.00  from holding Carlyle Secured Lending or generate 6.89% return on investment over 90 days.

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

Carlyle Secured Lending  vs.  Ares Capital

Carlyle Secured Lending

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Secured Lending are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Carlyle Secured may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ares Capital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ares Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carlyle Secured and Ares Capital

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

The idea behind Carlyle Secured Lending and Ares 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.