Correlation Between Reservoir Media and Ares Acquisition

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

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

Diversification Opportunities for Reservoir Media and Ares Acquisition

0.7

Correlation Coefficient

Reservoir Media  Ares Acquisition

Poor diversification

The 3 months correlation between Reservoir and Ares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition and Reservoir Media 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 Reservoir Media are associated (or correlated) with Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Reservoir Media i.e., Reservoir Media and Ares Acquisition go up and down completely randomly.

Pair Corralation between Reservoir Media and Ares Acquisition

Given the investment horizon of 90 days Reservoir Media is expected to under-perform the Ares Acquisition. In addition to that, Reservoir Media is 33.4 times more volatile than Ares Acquisition. It trades about -0.07 of its total potential returns per unit of risk. Ares Acquisition is currently generating about 0.35 per unit of volatility. If you would invest  1,090  in Ares Acquisition on September 28, 2024 and sell it today you would earn a total of  6.00  from holding Ares Acquisition or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Reservoir Media  vs.  Ares Acquisition

Reservoir Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

Ares Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ares Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Reservoir Media and Ares Acquisition

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

The idea behind Reservoir Media and Ares Acquisition 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.