Correlation Between Aqr Large and Large Cap

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

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

Diversification Opportunities for Aqr Large and Large Cap

0.84

Correlation Coefficient

Aqr Large  Large Cap

Very poor diversification

The 3 months correlation between Aqr and Large is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Large Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Equity and Aqr Large 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 Large Cap are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Equity has no effect on the direction of Aqr Large i.e., Aqr Large and Large Cap go up and down completely randomly.

Pair Corralation between Aqr Large and Large Cap

Assuming the 90 days horizon Aqr Large Cap is expected to under-perform the Large Cap. In addition to that, Aqr Large is 2.19 times more volatile than Large Cap Equity. It trades about -0.13 of its total potential returns per unit of risk. Large Cap Equity is currently generating about -0.11 per unit of volatility. If you would invest  1,236  in Large Cap Equity on November 28, 2024 and sell it today you would lose (93.00) from holding Large Cap Equity or give up 7.52% of portfolio value over 90 days.

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

Aqr Large Cap  vs.  Large Cap Equity

Aqr Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqr Large Cap 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 March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Large Cap Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Aqr Large and Large Cap

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

The idea behind Aqr Large Cap and Large Cap Equity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.