Correlation Between Brookfield Corp and Ares Management

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Can any of the company-specific risk be diversified away by investing in both Brookfield Corp 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 Brookfield Corp and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Corp and Ares Management LP, you can compare the effects of market volatilities on Brookfield Corp 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 Brookfield Corp with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Corp and Ares Management.

Diversification Opportunities for Brookfield Corp and Ares Management

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Brookfield and Ares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Corp 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 Brookfield Corp 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 Brookfield Corp 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 Brookfield Corp i.e., Brookfield Corp and Ares Management go up and down completely randomly.

Pair Corralation between Brookfield Corp and Ares Management

Allowing for the 90-day total investment horizon Brookfield Corp is expected to generate 1.77 times less return on investment than Ares Management. In addition to that, Brookfield Corp is 1.03 times more volatile than Ares Management LP. It trades about 0.06 of its total potential returns per unit of risk. Ares Management LP is currently generating about 0.12 per unit of volatility. If you would invest  6,812  in Ares Management LP on August 24, 2024 and sell it today you would earn a total of  10,689  from holding Ares Management LP or generate 156.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Brookfield Corp  vs.  Ares Management LP

 Performance 
       Timeline  
Brookfield Corp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.
Ares Management LP 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 14 (%) 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.

Brookfield Corp and Ares Management Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brookfield Corp and Ares Management

The main advantage of trading using opposite Brookfield Corp and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Corp 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 Brookfield Corp 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.
Check out your portfolio center.
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.

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