Correlation Between Aqr International and Aqr Small

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

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

Diversification Opportunities for Aqr International and Aqr Small

-0.5

Correlation Coefficient

Aqr International  Aqr Small

Very good diversification

The 3 months correlation between Aqr and Aqr is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Momentum and Aqr Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Small Cap and Aqr International 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 International Momentum are associated (or correlated) with Aqr Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Small Cap has no effect on the direction of Aqr International i.e., Aqr International and Aqr Small go up and down completely randomly.

Pair Corralation between Aqr International and Aqr Small

Assuming the 90 days horizon Aqr International Momentum is expected to generate 0.6 times more return on investment than Aqr Small. However, Aqr International Momentum is 1.66 times less risky than Aqr Small. It trades about 0.18 of its potential returns per unit of risk. Aqr Small Cap is currently generating about -0.08 per unit of risk. If you would invest  1,421  in Aqr International Momentum on December 26, 2024 and sell it today you would earn a total of  149.00  from holding Aqr International Momentum or generate 10.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Aqr International Momentum  vs.  Aqr Small Cap

Aqr International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr International Momentum are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aqr Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqr Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Aqr International and Aqr Small

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

The idea behind Aqr International Momentum and Aqr Small 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.