Correlation Between Aqr Large and Government Securities

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

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

Diversification Opportunities for Aqr Large and Government Securities

-0.63

Correlation Coefficient

Aqr Large  Government Securities

Excellent diversification

The 3 months correlation between Aqr and Government is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities and Aqr 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 Aqr Large Cap are associated (or correlated) with Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Aqr Large i.e., Aqr Large and Government Securities go up and down completely randomly.

Pair Corralation between Aqr Large and Government Securities

Assuming the 90 days horizon Aqr Large Cap is expected to generate 3.14 times more return on investment than Government Securities. However, Aqr Large is 3.14 times more volatile than Government Securities Fund. It trades about 0.21 of its potential returns per unit of risk. Government Securities Fund is currently generating about -0.11 per unit of risk. If you would invest  1,974  in Aqr Large Cap on September 12, 2024 and sell it today you would earn a total of  203.00  from holding Aqr Large Cap or generate 10.28% return on investment over 90 days.

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

Aqr Large Cap  vs.  Government Securities Fund

Aqr Large Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aqr Large and Government Securities

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

The idea behind Aqr Large Cap and Government Securities Fund 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.