Correlation Between Kinetics Market and Aqr Long

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

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

Diversification Opportunities for Kinetics Market and Aqr Long

0.9

Correlation Coefficient

Kinetics Market  Aqr Long

Almost no diversification

The 3 months correlation between Kinetics and Aqr is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Market Opportunities 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 Kinetics Market 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 Kinetics Market Opportunities are associated (or correlated) with Aqr Long. 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 Kinetics Market i.e., Kinetics Market and Aqr Long go up and down completely randomly.

Pair Corralation between Kinetics Market and Aqr Long

Assuming the 90 days horizon Kinetics Market Opportunities is expected to generate 4.85 times more return on investment than Aqr Long. However, Kinetics Market is 4.85 times more volatile than Aqr Long Short Equity. It trades about 0.28 of its potential returns per unit of risk. Aqr Long Short Equity is currently generating about 0.25 per unit of risk. If you would invest  5,306  in Kinetics Market Opportunities on September 12, 2024 and sell it today you would earn a total of  2,587  from holding Kinetics Market Opportunities or generate 48.76% return on investment over 90 days.

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

Kinetics Market Opportunities  vs.  Aqr Long Short Equity

Kinetics Market Oppo

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Market showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Long Short

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kinetics Market and Aqr Long

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

The idea behind Kinetics Market Opportunities 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.