Correlation Between Consumer Services and Aqr Large

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

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

Diversification Opportunities for Consumer Services and Aqr Large

-0.4

Correlation Coefficient

Consumer Services  Aqr Large

Very good diversification

The 3 months correlation between Consumer and Aqr is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Services Ultrasector and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Consumer Services 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 Consumer Services Ultrasector are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Consumer Services i.e., Consumer Services and Aqr Large go up and down completely randomly.

Pair Corralation between Consumer Services and Aqr Large

Assuming the 90 days horizon Consumer Services Ultrasector is expected to generate 0.82 times more return on investment than Aqr Large. However, Consumer Services Ultrasector is 1.22 times less risky than Aqr Large. It trades about 0.2 of its potential returns per unit of risk. Aqr Large Cap is currently generating about -0.12 per unit of risk. If you would invest  4,819  in Consumer Services Ultrasector on October 23, 2024 and sell it today you would earn a total of  1,284  from holding Consumer Services Ultrasector or generate 26.64% return on investment over 90 days.

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

Consumer Services Ultrasector  vs.  Aqr Large Cap

Consumer Services

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Services Ultrasector are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Services showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Large Cap

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Consumer Services and Aqr Large

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

The idea behind Consumer Services Ultrasector and Aqr Large Cap 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.