Correlation Between Aqr Large and Gamco Global

Can any of the company-specific risk be diversified away by investing in both Aqr Large and Gamco Global 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 Gamco Global 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 Gamco Global Telecommunications, you can compare the effects of market volatilities on Aqr Large and Gamco Global 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 Gamco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Large and Gamco Global.

Diversification Opportunities for Aqr Large and Gamco Global

0.89

Correlation Coefficient

Aqr Large  Gamco Global

Very poor diversification

The 3 months correlation between Aqr and Gamco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Gamco Global Telecommunication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Global Telecom 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 Gamco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Global Telecom has no effect on the direction of Aqr Large i.e., Aqr Large and Gamco Global go up and down completely randomly.

Pair Corralation between Aqr Large and Gamco Global

Assuming the 90 days horizon Aqr Large Cap is expected to generate 1.38 times more return on investment than Gamco Global. However, Aqr Large is 1.38 times more volatile than Gamco Global Telecommunications. It trades about 0.24 of its potential returns per unit of risk. Gamco Global Telecommunications is currently generating about 0.19 per unit of risk. If you would invest  2,257  in Aqr Large Cap on September 4, 2024 and sell it today you would earn a total of  321.00  from holding Aqr Large Cap or generate 14.22% return on investment over 90 days.

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

Aqr Large Cap  vs.  Gamco Global Telecommunication

Aqr Large Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly conflicting basic indicators, Aqr Large showed solid returns over the last few months and may actually be approaching a breakup point.

Gamco Global Telecom

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Aqr Large and Gamco Global

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

The idea behind Aqr Large Cap and Gamco Global Telecommunications 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.