Correlation Between Fundamental Large and Aqr Managed

Can any of the company-specific risk be diversified away by investing in both Fundamental Large 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 Fundamental Large and Aqr Managed 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 Managed Futures, you can compare the effects of market volatilities on Fundamental Large 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 Fundamental Large with a short position of Aqr Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Aqr Managed.

Diversification Opportunities for Fundamental Large and Aqr Managed

0.02

Correlation Coefficient

Fundamental Large  Aqr Managed

Significant diversification

The 3 months correlation between Fundamental and Aqr is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap 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 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 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 Fundamental Large i.e., Fundamental Large and Aqr Managed go up and down completely randomly.

Pair Corralation between Fundamental Large and Aqr Managed

Assuming the 90 days horizon Fundamental Large Cap is expected to generate 1.06 times more return on investment than Aqr Managed. However, Fundamental Large is 1.06 times more volatile than Aqr Managed Futures. It trades about 0.07 of its potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.04 per unit of risk. If you would invest  5,341  in Fundamental Large Cap on October 11, 2024 and sell it today you would earn a total of  1,853  from holding Fundamental Large Cap or generate 34.69% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Aqr Managed Futures

Fundamental Large Cap

Risk-Adjusted Performance

0 of 100

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 forward 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 Fundamental Large and Aqr Managed

The main advantage of trading using opposite Fundamental Large and Aqr Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large 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 Fundamental Large Cap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.