Correlation Between Mid Cap and Aqr Large

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

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

Diversification Opportunities for Mid Cap and Aqr Large

0.75

Correlation Coefficient

Mid Cap  Aqr Large

Poor diversification

The 3 months correlation between Mid and Aqr is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Mid Cap 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 Mid Cap Value Profund are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Mid Cap i.e., Mid Cap and Aqr Large go up and down completely randomly.

Pair Corralation between Mid Cap and Aqr Large

Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 0.42 times more return on investment than Aqr Large. However, Mid Cap Value Profund is 2.35 times less risky than Aqr Large. It trades about -0.12 of its potential returns per unit of risk. Aqr Large Cap is currently generating about -0.14 per unit of risk. If you would invest  9,333  in Mid Cap Value Profund on October 9, 2024 and sell it today you would lose (419.00) from holding Mid Cap Value Profund or give up 4.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

Mid Cap Value Profund  vs.  Aqr Large Cap

Mid Cap Value

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr 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.

Pair Trading with Mid Cap and Aqr Large

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

The idea behind Mid Cap Value Profund and Aqr Large Cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.