Correlation Between Ares Management and Mustang Bio

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

Diversification Opportunities for Ares Management and Mustang Bio

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ares Management and Mustang is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio and Ares Management 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 Management LP are associated (or correlated) with Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of Ares Management i.e., Ares Management and Mustang Bio go up and down completely randomly.

Pair Corralation between Ares Management and Mustang Bio

Given the investment horizon of 90 days Ares Management LP is expected to generate 0.52 times more return on investment than Mustang Bio. However, Ares Management LP is 1.93 times less risky than Mustang Bio. It trades about 0.04 of its potential returns per unit of risk. Mustang Bio is currently generating about -0.08 per unit of risk. If you would invest  6,252  in Ares Management LP on August 28, 2022 and sell it today you would earn a total of  1,595  from holding Ares Management LP or generate 25.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ares Management LP  vs.  Mustang Bio

 Performance (%) 
       Timeline  
Ares Management LP 
Ares Management Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Ares Management may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Ares Management Price Channel

Mustang Bio 
Mustang Performance
0 of 100
Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mustang Price Channel

Ares Management and Mustang Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ares Management and Mustang Bio

The main advantage of trading using opposite Ares Management and Mustang Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Mustang Bio 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 Mustang Bio will offset losses from the drop in Mustang Bio's long position.
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The idea behind Ares Management LP and Mustang Bio 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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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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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