Correlation Between Aqr Large and Tax-managed

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

Diversification Opportunities for Aqr Large and Tax-managed

0.89

Correlation Coefficient

Aqr Large  Tax-managed

Very poor diversification

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

Pair Corralation between Aqr Large and Tax-managed

Assuming the 90 days horizon Aqr Large Cap is expected to generate 1.09 times more return on investment than Tax-managed. However, Aqr Large is 1.09 times more volatile than Tax Managed Mid Small. It trades about -0.1 of its potential returns per unit of risk. Tax Managed Mid Small is currently generating about -0.29 per unit of risk. If you would invest  2,261  in Aqr Large Cap on December 4, 2024 and sell it today you would lose (54.00) from holding Aqr Large Cap or give up 2.39% of portfolio value over 90 days.

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

Aqr Large Cap  vs.  Tax Managed Mid Small

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.

Tax Managed Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Managed Mid Small 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.

Pair Trading with Aqr Large and Tax-managed

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

The idea behind Aqr Large Cap and Tax Managed Mid Small 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.