Correlation Between Aqr Diversified and Dfa Social

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

By analyzing existing cross correlation between Aqr Diversified Arbitrage and Dfa Social Fixed, you can compare the effects of market volatilities on Aqr Diversified and Dfa Social 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 Diversified with a short position of Dfa Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and Dfa Social.

Diversification Opportunities for Aqr Diversified and Dfa Social

0.9

Correlation Coefficient

Aqr Diversified  Dfa Social

Almost no diversification

The 3 months correlation between Aqr and Dfa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and Dfa Social Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Social Fixed and Aqr Diversified 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 Diversified Arbitrage are associated (or correlated) with Dfa Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Social Fixed has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and Dfa Social go up and down completely randomly.

Pair Corralation between Aqr Diversified and Dfa Social

Assuming the 90 days horizon Aqr Diversified Arbitrage is expected to generate 0.35 times more return on investment than Dfa Social. However, Aqr Diversified Arbitrage is 2.85 times less risky than Dfa Social. It trades about 0.4 of its potential returns per unit of risk. Dfa Social Fixed is currently generating about 0.12 per unit of risk. If you would invest  1,208  in Aqr Diversified Arbitrage on December 27, 2024 and sell it today you would earn a total of  32.00  from holding Aqr Diversified Arbitrage or generate 2.65% return on investment over 90 days.

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

Aqr Diversified Arbitrage  vs.  Dfa Social Fixed

Aqr Diversified Arbitrage

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Diversified Arbitrage are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Social Fixed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Social Fixed are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dfa Social 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 Diversified and Dfa Social

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

The idea behind Aqr Diversified Arbitrage and Dfa Social Fixed 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.