Correlation Between International Stock and Aqr Managed

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

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

Diversification Opportunities for International Stock and Aqr Managed

-0.81

Correlation Coefficient

International Stock  Aqr Managed

Pay attention - limited upside

The 3 months correlation between International and Aqr is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund 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 International Stock 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 International Stock Fund 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 International Stock i.e., International Stock and Aqr Managed go up and down completely randomly.

Pair Corralation between International Stock and Aqr Managed

Assuming the 90 days horizon International Stock Fund is expected to under-perform the Aqr Managed. In addition to that, International Stock is 1.54 times more volatile than Aqr Managed Futures. It trades about -0.27 of its total potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.25 per unit of volatility. If you would invest  819.00  in Aqr Managed Futures on October 11, 2024 and sell it today you would earn a total of  28.00  from holding Aqr Managed Futures or generate 3.42% return on investment over 90 days.

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

International Stock Fund  vs.  Aqr Managed Futures

International Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Stock Fund 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 Managed Futures

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aqr Managed may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with International Stock and Aqr Managed

The main advantage of trading using opposite International Stock and Aqr Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Stock 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 International Stock Fund 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.