Correlation Between Aqr Risk and Dodge Cox

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

By analyzing existing cross correlation between Aqr Risk Parity and Dodge Cox Global, you can compare the effects of market volatilities on Aqr Risk and Dodge Cox 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 Risk with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Risk and Dodge Cox.

Diversification Opportunities for Aqr Risk and Dodge Cox

0.37

Correlation Coefficient

Aqr Risk  Dodge Cox

Weak diversification

The 3 months correlation between Aqr and Dodge is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Parity and Dodge Cox Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Global and Aqr Risk 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 Risk Parity are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox Global has no effect on the direction of Aqr Risk i.e., Aqr Risk and Dodge Cox go up and down completely randomly.

Pair Corralation between Aqr Risk and Dodge Cox

Assuming the 90 days horizon Aqr Risk Parity is expected to generate 0.46 times more return on investment than Dodge Cox. However, Aqr Risk Parity is 2.16 times less risky than Dodge Cox. It trades about -0.01 of its potential returns per unit of risk. Dodge Cox Global is currently generating about -0.07 per unit of risk. If you would invest  1,058  in Aqr Risk Parity on October 7, 2024 and sell it today you would lose (8.00) from holding Aqr Risk Parity or give up 0.76% of portfolio value over 90 days.

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

Aqr Risk Parity  vs.  Dodge Cox Global

Aqr Risk Parity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dodge Cox Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox Global 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Aqr Risk and Dodge Cox

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

The idea behind Aqr Risk Parity and Dodge Cox Global 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.