Correlation Between Aqr Large and Aberdeen Small

Can any of the company-specific risk be diversified away by investing in both Aqr Large and Aberdeen 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 Large and Aberdeen Small 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 Aberdeen Small Cap, you can compare the effects of market volatilities on Aqr Large and Aberdeen 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 Large with a short position of Aberdeen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Large and Aberdeen Small.

Diversification Opportunities for Aqr Large and Aberdeen Small

0.5

Correlation Coefficient

Aqr Large  Aberdeen Small

Very weak diversification

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

Pair Corralation between Aqr Large and Aberdeen Small

Assuming the 90 days horizon Aqr Large Cap is expected to under-perform the Aberdeen Small. In addition to that, Aqr Large is 1.67 times more volatile than Aberdeen Small Cap. It trades about -0.13 of its total potential returns per unit of risk. Aberdeen Small Cap is currently generating about -0.08 per unit of volatility. If you would invest  3,849  in Aberdeen Small Cap on December 1, 2024 and sell it today you would lose (229.00) from holding Aberdeen Small Cap or give up 5.95% of portfolio value over 90 days.

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

Aqr Large Cap  vs.  Aberdeen Small Cap

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Aberdeen Small Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aqr Large and Aberdeen Small

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

The idea behind Aqr Large Cap and Aberdeen 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.