Correlation Between Aqr International and Aqr Long-short

Can any of the company-specific risk be diversified away by investing in both Aqr International and Aqr Long-short 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 International and Aqr Long-short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aqr International Defensive and Aqr Long Short Equity, you can compare the effects of market volatilities on Aqr International and Aqr Long-short 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 International with a short position of Aqr Long-short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr International and Aqr Long-short.

Diversification Opportunities for Aqr International and Aqr Long-short

-0.82

Correlation Coefficient

Aqr International  Aqr Long-short

Pay attention - limited upside

The 3 months correlation between Aqr and Aqr is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Defensive and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short and Aqr International 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 International Defensive are associated (or correlated) with Aqr Long-short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of Aqr International i.e., Aqr International and Aqr Long-short go up and down completely randomly.

Pair Corralation between Aqr International and Aqr Long-short

Assuming the 90 days horizon Aqr International is expected to generate 2.06 times less return on investment than Aqr Long-short. In addition to that, Aqr International is 1.44 times more volatile than Aqr Long Short Equity. It trades about 0.03 of its total potential returns per unit of risk. Aqr Long Short Equity is currently generating about 0.1 per unit of volatility. If you would invest  1,596  in Aqr Long Short Equity on September 1, 2024 and sell it today you would earn a total of  99.00  from holding Aqr Long Short Equity or generate 6.2% return on investment over 90 days.

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

Aqr International Defensive  vs.  Aqr Long Short Equity

Aqr International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aqr Long Short

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aqr Long-short 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 International and Aqr Long-short

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

The idea behind Aqr International Defensive and Aqr Long Short Equity 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.