Correlation Between Alphacentric Hedged and Aqr Equity

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

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

Diversification Opportunities for Alphacentric Hedged and Aqr Equity

0.34

Correlation Coefficient

Alphacentric Hedged  Aqr Equity

Weak diversification

The 3 months correlation between Alphacentric and Aqr is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alphacentric Hedged Market and Aqr Equity Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Equity Market and Alphacentric Hedged 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 Alphacentric Hedged Market are associated (or correlated) with Aqr Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Equity Market has no effect on the direction of Alphacentric Hedged i.e., Alphacentric Hedged and Aqr Equity go up and down completely randomly.

Pair Corralation between Alphacentric Hedged and Aqr Equity

Assuming the 90 days horizon Alphacentric Hedged is expected to generate 2.48 times less return on investment than Aqr Equity. In addition to that, Alphacentric Hedged is 1.71 times more volatile than Aqr Equity Market. It trades about 0.08 of its total potential returns per unit of risk. Aqr Equity Market is currently generating about 0.35 per unit of volatility. If you would invest  948.00  in Aqr Equity Market on October 24, 2024 and sell it today you would earn a total of  82.00  from holding Aqr Equity Market or generate 8.65% return on investment over 90 days.

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

Alphacentric Hedged Market  vs.  Aqr Equity Market

Alphacentric Hedged

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphacentric Hedged Market are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alphacentric Hedged is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Equity Market

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Equity Market are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alphacentric Hedged and Aqr Equity

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

The idea behind Alphacentric Hedged Market and Aqr Equity Market 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.