Correlation Between Fundamental Large and Aqr Long-short

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

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

Diversification Opportunities for Fundamental Large and Aqr Long-short

-0.45

Correlation Coefficient

Fundamental Large  Aqr Long-short

Very good diversification

The 3 months correlation between Fundamental and Aqr is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Aqr Long-short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of Fundamental Large i.e., Fundamental Large and Aqr Long-short go up and down completely randomly.

Pair Corralation between Fundamental Large and Aqr Long-short

Assuming the 90 days horizon Fundamental Large Cap is expected to under-perform the Aqr Long-short. In addition to that, Fundamental Large is 1.9 times more volatile than Aqr Long Short Equity. It trades about -0.1 of its total potential returns per unit of risk. Aqr Long Short Equity is currently generating about 0.23 per unit of volatility. If you would invest  1,564  in Aqr Long Short Equity on December 29, 2024 and sell it today you would earn a total of  128.00  from holding Aqr Long Short Equity or generate 8.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Fundamental Large Cap  vs.  Aqr Long Short Equity

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap 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 Long Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Long-short may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fundamental Large and Aqr Long-short

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

The idea behind Fundamental Large Cap and Aqr Long Short Equity 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.