Correlation Between Aqr Large and Columbia Overseas

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

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

Diversification Opportunities for Aqr Large and Columbia Overseas

0.14

Correlation Coefficient

Aqr Large  Columbia Overseas

Average diversification

The 3 months correlation between Aqr and Columbia is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Columbia Overseas Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Overseas Value and Aqr Large 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 Large Cap are associated (or correlated) with Columbia Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Overseas Value has no effect on the direction of Aqr Large i.e., Aqr Large and Columbia Overseas go up and down completely randomly.

Pair Corralation between Aqr Large and Columbia Overseas

Assuming the 90 days horizon Aqr Large Cap is expected to under-perform the Columbia Overseas. In addition to that, Aqr Large is 1.7 times more volatile than Columbia Overseas Value. It trades about -0.08 of its total potential returns per unit of risk. Columbia Overseas Value is currently generating about 0.34 per unit of volatility. If you would invest  1,036  in Columbia Overseas Value on December 20, 2024 and sell it today you would earn a total of  178.00  from holding Columbia Overseas Value or generate 17.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Aqr Large Cap  vs.  Columbia Overseas Value

Aqr Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqr Large 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.

Columbia Overseas Value

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Overseas Value are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aqr Large and Columbia Overseas

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

The idea behind Aqr Large Cap and Columbia Overseas Value 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.