Correlation Between Dfa International and Aqr Managed

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

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

Diversification Opportunities for Dfa International and Aqr Managed

0.76

Correlation Coefficient

Dfa International  Aqr Managed

Poor diversification

The 3 months correlation between Dfa and Aqr is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Value and Aqr Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Managed Futures and Dfa International 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 Dfa International Value are associated (or correlated) with Aqr Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Managed Futures has no effect on the direction of Dfa International i.e., Dfa International and Aqr Managed go up and down completely randomly.

Pair Corralation between Dfa International and Aqr Managed

Assuming the 90 days horizon Dfa International Value is expected to generate 1.31 times more return on investment than Aqr Managed. However, Dfa International is 1.31 times more volatile than Aqr Managed Futures. It trades about 0.31 of its potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.09 per unit of risk. If you would invest  1,738  in Dfa International Value on December 19, 2024 and sell it today you would earn a total of  286.00  from holding Dfa International Value or generate 16.46% return on investment over 90 days.

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

Dfa International Value  vs.  Aqr Managed Futures

Dfa International Value

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa International Value are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Dfa International showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Managed Futures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aqr Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dfa International and Aqr Managed

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

The idea behind Dfa International Value and Aqr Managed Futures 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.