Correlation Between Ishares Municipal and Aqr Style

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

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

Diversification Opportunities for Ishares Municipal and Aqr Style

-0.04

Correlation Coefficient

Ishares Municipal  Aqr Style

Good diversification

The 3 months correlation between Ishares and Aqr is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Aqr Style Premia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Style Premia and Ishares Municipal 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 Ishares Municipal Bond are associated (or correlated) with Aqr Style. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Style Premia has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Aqr Style go up and down completely randomly.

Pair Corralation between Ishares Municipal and Aqr Style

Assuming the 90 days horizon Ishares Municipal is expected to generate 8.45 times less return on investment than Aqr Style. But when comparing it to its historical volatility, Ishares Municipal Bond is 3.31 times less risky than Aqr Style. It trades about 0.03 of its potential returns per unit of risk. Aqr Style Premia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  563.00  in Aqr Style Premia on October 11, 2024 and sell it today you would earn a total of  221.00  from holding Aqr Style Premia or generate 39.25% return on investment over 90 days.

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

Ishares Municipal Bond  vs.  Aqr Style Premia

Ishares Municipal Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aqr Style Premia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Style Premia are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Style is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Municipal and Aqr Style

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

The idea behind Ishares Municipal Bond and Aqr Style Premia 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.