Correlation Between Long Term and Aqr Large

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

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

Diversification Opportunities for Long Term and Aqr Large

0.69

Correlation Coefficient

Long Term  Aqr Large

Poor diversification

The 3 months correlation between Long and Aqr is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund 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 Long Term 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 Long Term Government Fund 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 Long Term i.e., Long Term and Aqr Large go up and down completely randomly.

Pair Corralation between Long Term and Aqr Large

Assuming the 90 days horizon Long Term Government Fund is expected to generate 11.29 times more return on investment than Aqr Large. However, Long Term is 11.29 times more volatile than Aqr Large Cap. It trades about 0.03 of its potential returns per unit of risk. Aqr Large Cap is currently generating about 0.04 per unit of risk. If you would invest  1,521  in Long Term Government Fund on October 25, 2024 and sell it today you would lose (165.00) from holding Long Term Government Fund or give up 10.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Long Term Government Fund  vs.  Aqr Large Cap

Long Term Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Term Government Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Long Term 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 fairly strong basic indicators, Aqr Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Long Term and Aqr Large

The main advantage of trading using opposite Long Term and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term 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 Long Term Government Fund 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.