Correlation Between Aqr Risk and Aqr Alternative

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

Diversification Opportunities for Aqr Risk and Aqr Alternative

0.72

Correlation Coefficient

Aqr Risk  Aqr Alternative

Poor diversification

The 3 months correlation between Aqr and Aqr is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Parity and Aqr Alternative Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Alternative Risk 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 Aqr Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Alternative Risk has no effect on the direction of Aqr Risk i.e., Aqr Risk and Aqr Alternative go up and down completely randomly.

Pair Corralation between Aqr Risk and Aqr Alternative

Assuming the 90 days horizon Aqr Risk Parity is expected to under-perform the Aqr Alternative. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aqr Risk Parity is 1.11 times less risky than Aqr Alternative. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Aqr Alternative Risk is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,149  in Aqr Alternative Risk on October 8, 2024 and sell it today you would lose (10.00) from holding Aqr Alternative Risk or give up 0.87% 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.  Aqr Alternative Risk

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.

Aqr Alternative Risk

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Aqr Risk Parity and Aqr Alternative Risk 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.