Correlation Between Ares Capital and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Ares Capital and Alcoa Corp 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 Ares Capital and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and Alcoa Corp, you can compare the effects of market volatilities on Ares Capital and Alcoa Corp 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 Ares Capital with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and Alcoa Corp.
Diversification Opportunities for Ares Capital and Alcoa Corp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ares and Alcoa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Ares Capital 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 Ares Capital are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Ares Capital i.e., Ares Capital and Alcoa Corp go up and down completely randomly.
Pair Corralation between Ares Capital and Alcoa Corp
Given the investment horizon of 90 days Ares Capital is expected to generate 5.67 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Ares Capital is 4.3 times less risky than Alcoa Corp. It trades about 0.09 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,965 in Alcoa Corp on January 24, 2024 and sell it today you would earn a total of 670.00 from holding Alcoa Corp or generate 22.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. Alcoa Corp
Performance |
| Timeline |
| Ares Capital |
| Alcoa Corp |
Ares Capital and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and Alcoa Corp
The main advantage of trading using opposite Ares Capital and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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