Correlation Between Strategic Allocation: and Aqr Equity

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

By analyzing existing cross correlation between Strategic Allocation Moderate and Aqr Equity Market, you can compare the effects of market volatilities on Strategic Allocation: and Aqr Equity 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 Strategic Allocation: with a short position of Aqr Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation: and Aqr Equity.

Diversification Opportunities for Strategic Allocation: and Aqr Equity

0.63

Correlation Coefficient

Strategic Allocation:  Aqr Equity

Poor diversification

The 3 months correlation between Strategic and Aqr is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Aqr Equity Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Equity Market and Strategic Allocation: 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 Strategic Allocation Moderate are associated (or correlated) with Aqr Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Equity Market has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Aqr Equity go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Aqr Equity

Assuming the 90 days horizon Strategic Allocation Moderate is expected to under-perform the Aqr Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Strategic Allocation Moderate is 1.48 times less risky than Aqr Equity. The mutual fund trades about -0.38 of its potential returns per unit of risk. The Aqr Equity Market is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,052  in Aqr Equity Market on October 8, 2024 and sell it today you would lose (37.00) from holding Aqr Equity Market or give up 3.52% of portfolio value over 90 days.

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

Strategic Allocation Moderate  vs.  Aqr Equity Market

Strategic Allocation:

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aqr Equity Market

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Equity Market are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strategic Allocation: and Aqr Equity

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

The idea behind Strategic Allocation Moderate and Aqr Equity 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.