Correlation Between Aqr Risk and Vanguard Extended

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

Diversification Opportunities for Aqr Risk and Vanguard Extended

0.59

Correlation Coefficient

Aqr Risk  Vanguard Extended

Very weak diversification

The 3 months correlation between Aqr and Vanguard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Parity and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market 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 Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Aqr Risk i.e., Aqr Risk and Vanguard Extended go up and down completely randomly.

Pair Corralation between Aqr Risk and Vanguard Extended

Assuming the 90 days horizon Aqr Risk Parity is expected to generate 0.6 times more return on investment than Vanguard Extended. However, Aqr Risk Parity is 1.68 times less risky than Vanguard Extended. It trades about -0.02 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about -0.02 per unit of risk. If you would invest  1,056  in Aqr Risk Parity on October 7, 2024 and sell it today you would lose (6.00) from holding Aqr Risk Parity or give up 0.57% of portfolio value over 90 days.

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

Aqr Risk Parity  vs.  Vanguard Extended Market

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.

Vanguard Extended Market

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Extended may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aqr Risk and Vanguard Extended

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

The idea behind Aqr Risk Parity and Vanguard Extended Market 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.