Correlation Between Ares Capital and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Ares Capital and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and SPDR SP Dividend, you can compare the effects of market volatilities on Ares Capital and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and SPDR SP.
Diversification Opportunities for Ares Capital and SPDR SP
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and SPDR is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Dividend has no effect on the direction of Ares Capital i.e., Ares Capital and SPDR SP go up and down completely randomly.
Pair Corralation between Ares Capital and SPDR SP
Given the investment horizon of 90 days Ares Capital is expected to generate 1.07 times more return on investment than SPDR SP. However, Ares Capital is 1.07 times more volatile than SPDR SP Dividend. It trades about 0.16 of its potential returns per unit of risk. SPDR SP Dividend is currently generating about 0.01 per unit of risk. If you would invest 2,024 in Ares Capital on January 26, 2024 and sell it today you would earn a total of 55.00 from holding Ares Capital or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ares Capital vs. SPDR SP Dividend
Performance |
| Timeline |
| Ares Capital |
| SPDR SP Dividend |
Ares Capital and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and SPDR SP
The main advantage of trading using opposite Ares Capital and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP'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 |
| SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR MSCI USA | SPDR SP vs. SPDR MSCI EAFE | SPDR SP vs. SPDR SSGA Large |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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