Correlation Between Carlyle and Ares Capital

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

Diversification Opportunities for Carlyle and Ares Capital

-0.32

Correlation Coefficient

Carlyle  Ares Capital

Very good diversification

The 3 months correlation between Carlyle and Ares is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Carlyle 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 Group 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 i.e., Carlyle and Ares Capital go up and down completely randomly.

Pair Corralation between Carlyle and Ares Capital

Allowing for the 90-day total investment horizon Carlyle Group is expected to under-perform the Ares Capital. In addition to that, Carlyle is 2.61 times more volatile than Ares Capital. It trades about 0.0 of its total potential returns per unit of risk. Ares Capital is currently generating about 0.17 per unit of volatility. If you would invest  1,965  in Ares Capital on February 18, 2024 and sell it today you would earn a total of  150.00  from holding Ares Capital or generate 7.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Carlyle Group  vs.  Ares Capital

Carlyle Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Carlyle is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Ares Capital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 13 (%) 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 June 2024.

Pair Trading with Carlyle and Ares Capital

The main advantage of trading using opposite Carlyle and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle 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 Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.