Correlation Between Aqr Risk and Nuveen California

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

Diversification Opportunities for Aqr Risk and Nuveen California

0.79

Correlation Coefficient

Aqr Risk  Nuveen California

Poor diversification

The 3 months correlation between Aqr and Nuveen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Parity and Nuveen California High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California High 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 Nuveen California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California High has no effect on the direction of Aqr Risk i.e., Aqr Risk and Nuveen California go up and down completely randomly.

Pair Corralation between Aqr Risk and Nuveen California

Assuming the 90 days horizon Aqr Risk Parity is expected to under-perform the Nuveen California. In addition to that, Aqr Risk is 2.41 times more volatile than Nuveen California High. It trades about -0.24 of its total potential returns per unit of risk. Nuveen California High is currently generating about -0.35 per unit of volatility. If you would invest  816.00  in Nuveen California High on October 8, 2024 and sell it today you would lose (19.00) from holding Nuveen California High or give up 2.33% of portfolio value over 90 days.

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

Aqr Risk Parity  vs.  Nuveen California High

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.

Nuveen California High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen California High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen California 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 Risk and Nuveen California

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

The idea behind Aqr Risk Parity and Nuveen California High 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.