Correlation Between Aqr Large and Fundamental Large

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

Diversification Opportunities for Aqr Large and Fundamental Large

0.97

Correlation Coefficient

Aqr Large  Fundamental Large

Almost no diversification

The 3 months correlation between Aqr and FUNDAMENTAL is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large 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 Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Aqr Large i.e., Aqr Large and Fundamental Large go up and down completely randomly.

Pair Corralation between Aqr Large and Fundamental Large

Assuming the 90 days horizon Aqr Large Cap is expected to generate 1.25 times more return on investment than Fundamental Large. However, Aqr Large is 1.25 times more volatile than Fundamental Large Cap. It trades about 0.23 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about 0.19 per unit of risk. If you would invest  2,264  in Aqr Large Cap on September 3, 2024 and sell it today you would earn a total of  317.00  from holding Aqr Large Cap or generate 14.0% return on investment over 90 days.

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

Aqr Large Cap  vs.  Fundamental Large Cap

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 weak basic indicators, Aqr Large showed solid returns over the last few months and may actually be approaching a breakup point.

Fundamental Large Cap

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Aqr Large and Fundamental Large

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

The idea behind Aqr Large Cap and Fundamental 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.