Correlation Between NYSE Composite and Aqr Risk-balanced

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

By analyzing existing cross correlation between NYSE Composite and Aqr Risk Balanced Modities, you can compare the effects of market volatilities on NYSE Composite and Aqr Risk-balanced 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 NYSE Composite with a short position of Aqr Risk-balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Aqr Risk-balanced.

Diversification Opportunities for NYSE Composite and Aqr Risk-balanced

0.64

Correlation Coefficient

NYSE Composite  Aqr Risk-balanced

Poor diversification

The 3 months correlation between NYSE and Aqr is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Aqr Risk Balanced Modities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Risk Balanced and NYSE Composite 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 NYSE Composite are associated (or correlated) with Aqr Risk-balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Risk Balanced has no effect on the direction of NYSE Composite i.e., NYSE Composite and Aqr Risk-balanced go up and down completely randomly.

Pair Corralation between NYSE Composite and Aqr Risk-balanced

Assuming the 90 days trading horizon NYSE Composite is expected to generate 6.84 times less return on investment than Aqr Risk-balanced. In addition to that, NYSE Composite is 1.05 times more volatile than Aqr Risk Balanced Modities. It trades about 0.02 of its total potential returns per unit of risk. Aqr Risk Balanced Modities is currently generating about 0.17 per unit of volatility. If you would invest  849.00  in Aqr Risk Balanced Modities on December 28, 2024 and sell it today you would earn a total of  71.00  from holding Aqr Risk Balanced Modities or generate 8.36% return on investment over 90 days.

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

NYSE Composite  vs.  Aqr Risk Balanced Modities

Pair Trading with NYSE Composite and Aqr Risk-balanced

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

The idea behind NYSE Composite and Aqr Risk Balanced Modities 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.