Correlation Between Ares Capital and Target
Can any of the company-specific risk be diversified away by investing in both Ares Capital and Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and Target, you can compare the effects of market volatilities on Ares Capital and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and Target.
Diversification Opportunities for Ares Capital and Target
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Target is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Ares Capital i.e., Ares Capital and Target go up and down completely randomly.
Pair Corralation between Ares Capital and Target
Given the investment horizon of 90 days Ares Capital is expected to generate 2.11 times less return on investment than Target. But when comparing it to its historical volatility, Ares Capital is 3.13 times less risky than Target. It trades about 0.17 of its potential returns per unit of risk. Target is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 15,148 in Target on January 24, 2024 and sell it today you would earn a total of 1,563 from holding Target or generate 10.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. Target
Performance |
| Timeline |
| Ares Capital |
| Target |
Ares Capital and Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and Target
The main advantage of trading using opposite Ares Capital and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, Target 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 Target will offset losses from the drop in Target'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 |
| Target vs. Big Lots | Target vs. Aquagold International | Target vs. Thrivent High Yield | Target vs. Morningstar Unconstrained Allocation |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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