Correlation Between Aqr Large and Nicholas Fund

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

Diversification Opportunities for Aqr Large and Nicholas Fund

0.8

Correlation Coefficient

Aqr Large  Nicholas Fund

Very poor diversification

The 3 months correlation between Aqr and Nicholas is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Nicholas Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Fund 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 Nicholas Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Fund has no effect on the direction of Aqr Large i.e., Aqr Large and Nicholas Fund go up and down completely randomly.

Pair Corralation between Aqr Large and Nicholas Fund

Assuming the 90 days horizon Aqr Large Cap is expected to under-perform the Nicholas Fund. In addition to that, Aqr Large is 1.88 times more volatile than Nicholas Fund Inc. It trades about -0.03 of its total potential returns per unit of risk. Nicholas Fund Inc is currently generating about 0.01 per unit of volatility. If you would invest  9,627  in Nicholas Fund Inc on October 27, 2024 and sell it today you would earn a total of  34.00  from holding Nicholas Fund Inc or generate 0.35% 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.  Nicholas Fund Inc

Aqr Large Cap

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Aqr Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nicholas Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nicholas Fund Inc has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nicholas Fund 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 Nicholas Fund

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

The idea behind Aqr Large Cap and Nicholas Fund Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.