Correlation Between Aqr International and Aqr Style

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

Diversification Opportunities for Aqr International and Aqr Style

0.29

Correlation Coefficient

Aqr International  Aqr Style

Modest diversification

The 3 months correlation between Aqr and Aqr is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Defensive and Aqr Style Premia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Style Premia 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 Style. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Style Premia has no effect on the direction of Aqr International i.e., Aqr International and Aqr Style go up and down completely randomly.

Pair Corralation between Aqr International and Aqr Style

Assuming the 90 days horizon Aqr International Defensive is expected to under-perform the Aqr Style. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aqr International Defensive is 2.26 times less risky than Aqr Style. The mutual fund trades about -0.32 of its potential returns per unit of risk. The Aqr Style Premia is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  793.00  in Aqr Style Premia on September 29, 2024 and sell it today you would lose (39.00) from holding Aqr Style Premia or give up 4.92% of portfolio value over 90 days.

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

Aqr International Defensive  vs.  Aqr Style Premia

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aqr Style Premia

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Aqr International Defensive and Aqr Style Premia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.