Correlation Between Aqr Diversified and Aqr Large

Can any of the company-specific risk be diversified away by investing in both Aqr Diversified and Aqr Large 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 Aqr Diversified and Aqr Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aqr Diversified Arbitrage and Aqr Large Cap, you can compare the effects of market volatilities on Aqr Diversified and Aqr Large 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 Aqr Diversified with a short position of Aqr Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and Aqr Large.

Diversification Opportunities for Aqr Diversified and Aqr Large

-0.36

Correlation Coefficient

Aqr Diversified  Aqr Large

Very good diversification

The 3 months correlation between Aqr and Aqr is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Aqr Diversified 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 Aqr Diversified Arbitrage are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and Aqr Large go up and down completely randomly.

Pair Corralation between Aqr Diversified and Aqr Large

Assuming the 90 days horizon Aqr Diversified Arbitrage is expected to under-perform the Aqr Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aqr Diversified Arbitrage is 5.6 times less risky than Aqr Large. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Aqr Large Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Aqr Large Cap on August 31, 2024 and sell it today you would earn a total of  191.00  from holding Aqr Large Cap or generate 9.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aqr Diversified Arbitrage  vs.  Aqr Large Cap

Aqr Diversified Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Diversified Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Large Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Aqr Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Aqr Diversified and Aqr Large

The main advantage of trading using opposite Aqr Diversified and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Diversified position performs unexpectedly, Aqr Large 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 Aqr Large will offset losses from the drop in Aqr Large's long position.

The idea behind Aqr Diversified Arbitrage and Aqr Large Cap 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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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.