Correlation Between Aqr Long-short and Columbia Treasury

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

By analyzing existing cross correlation between Aqr Long Short Equity and Columbia Treasury Index, you can compare the effects of market volatilities on Aqr Long-short and Columbia Treasury 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 Long-short with a short position of Columbia Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Long-short and Columbia Treasury.

Diversification Opportunities for Aqr Long-short and Columbia Treasury

0.83

Correlation Coefficient

Aqr Long-short  Columbia Treasury

Very poor diversification

The 3 months correlation between Aqr and Columbia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Long Short Equity and Columbia Treasury Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Treasury Index and Aqr Long-short 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 Long Short Equity are associated (or correlated) with Columbia Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Treasury Index has no effect on the direction of Aqr Long-short i.e., Aqr Long-short and Columbia Treasury go up and down completely randomly.

Pair Corralation between Aqr Long-short and Columbia Treasury

Assuming the 90 days horizon Aqr Long Short Equity is expected to generate 1.89 times more return on investment than Columbia Treasury. However, Aqr Long-short is 1.89 times more volatile than Columbia Treasury Index. It trades about 0.23 of its potential returns per unit of risk. Columbia Treasury Index is currently generating about 0.14 per unit of risk. If you would invest  1,564  in Aqr Long Short Equity on December 29, 2024 and sell it today you would earn a total of  128.00  from holding Aqr Long Short Equity or generate 8.18% return on investment over 90 days.

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

Aqr Long Short Equity  vs.  Columbia Treasury Index

Aqr Long Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Long-short may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Columbia Treasury Index

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Treasury Index are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Treasury 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 Long-short and Columbia Treasury

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

The idea behind Aqr Long Short Equity and Columbia Treasury Index 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.