Correlation Between Diversified Bond and Aqr Diversified

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

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

Diversification Opportunities for Diversified Bond and Aqr Diversified

0.68

Correlation Coefficient

Diversified Bond  Aqr Diversified

Poor diversification

The 3 months correlation between Diversified and Aqr is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Bond Fund and Aqr Diversified Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Diversified Arbitrage and Diversified Bond 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 Diversified Bond Fund are associated (or correlated) with Aqr Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Diversified Arbitrage has no effect on the direction of Diversified Bond i.e., Diversified Bond and Aqr Diversified go up and down completely randomly.

Pair Corralation between Diversified Bond and Aqr Diversified

Assuming the 90 days horizon Diversified Bond Fund is expected to under-perform the Aqr Diversified. But the mutual fund apears to be less risky and, when comparing its historical volatility, Diversified Bond Fund is 1.39 times less risky than Aqr Diversified. The mutual fund trades about -0.53 of its potential returns per unit of risk. The Aqr Diversified Arbitrage is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,221  in Aqr Diversified Arbitrage on October 9, 2024 and sell it today you would lose (10.00) from holding Aqr Diversified Arbitrage or give up 0.82% of portfolio value over 90 days.

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

Diversified Bond Fund  vs.  Aqr Diversified Arbitrage

Diversified Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aqr Diversified Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Diversified Bond and Aqr Diversified

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

The idea behind Diversified Bond Fund and Aqr Diversified Arbitrage 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.