Correlation Between Aqr Diversified and Prudential Corporate

Can any of the company-specific risk be diversified away by investing in both Aqr Diversified and Prudential Corporate 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 Prudential Corporate 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 Prudential Porate Bond, you can compare the effects of market volatilities on Aqr Diversified and Prudential Corporate 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 Prudential Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and Prudential Corporate.

Diversification Opportunities for Aqr Diversified and Prudential Corporate

0.88

Correlation Coefficient

Aqr Diversified  Prudential Corporate

Very poor diversification

The 3 months correlation between Aqr and Prudential is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and Prudential Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Porate Bond 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 Prudential Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Porate Bond has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and Prudential Corporate go up and down completely randomly.

Pair Corralation between Aqr Diversified and Prudential Corporate

Assuming the 90 days horizon Aqr Diversified Arbitrage is expected to generate 0.34 times more return on investment than Prudential Corporate. However, Aqr Diversified Arbitrage is 2.93 times less risky than Prudential Corporate. It trades about 0.38 of its potential returns per unit of risk. Prudential Porate Bond is currently generating about 0.1 per unit of risk. If you would invest  1,209  in Aqr Diversified Arbitrage on December 29, 2024 and sell it today you would earn a total of  31.00  from holding Aqr Diversified Arbitrage or generate 2.56% return on investment over 90 days.

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

Aqr Diversified Arbitrage  vs.  Prudential Porate Bond

Aqr Diversified Arbitrage

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Diversified Arbitrage are ranked lower than 30 (%) 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.

Prudential Porate Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Porate Bond are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Prudential Corporate 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 Prudential Corporate

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

The idea behind Aqr Diversified Arbitrage and Prudential Porate Bond 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.