Correlation Between Ab Equity and Aqr International

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

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

Diversification Opportunities for Ab Equity and Aqr International

0.65

Correlation Coefficient

Ab Equity  Aqr International

Poor diversification

The 3 months correlation between AUIAX and Aqr is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ab Equity Income and Aqr International Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr International and Ab Equity 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 Ab Equity Income are associated (or correlated) with Aqr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr International has no effect on the direction of Ab Equity i.e., Ab Equity and Aqr International go up and down completely randomly.

Pair Corralation between Ab Equity and Aqr International

Assuming the 90 days horizon Ab Equity Income is expected to under-perform the Aqr International. In addition to that, Ab Equity is 2.73 times more volatile than Aqr International Defensive. It trades about -0.29 of its total potential returns per unit of risk. Aqr International Defensive is currently generating about -0.39 per unit of volatility. If you would invest  1,547  in Aqr International Defensive on October 9, 2024 and sell it today you would lose (85.00) from holding Aqr International Defensive or give up 5.49% of portfolio value over 90 days.

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

Ab Equity Income  vs.  Aqr International Defensive

Ab Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Equity Income 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.

Aqr International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr International Defensive 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 Ab Equity and Aqr International

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

The idea behind Ab Equity Income and Aqr International Defensive 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.