Correlation Between Aqr Long-short and Dearborn Partners

Can any of the company-specific risk be diversified away by investing in both Aqr Long-short and Dearborn Partners 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 Dearborn Partners 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 Dearborn Partners Rising, you can compare the effects of market volatilities on Aqr Long-short and Dearborn Partners 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 Dearborn Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Long-short and Dearborn Partners.

Diversification Opportunities for Aqr Long-short and Dearborn Partners

0.6

Correlation Coefficient

Aqr Long-short  Dearborn Partners

Poor diversification

The 3 months correlation between AQR and Dearborn is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Long Short Equity and Dearborn Partners Rising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dearborn Partners Rising 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 Dearborn Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dearborn Partners Rising has no effect on the direction of Aqr Long-short i.e., Aqr Long-short and Dearborn Partners go up and down completely randomly.

Pair Corralation between Aqr Long-short and Dearborn Partners

Assuming the 90 days horizon Aqr Long Short Equity is expected to generate 0.73 times more return on investment than Dearborn Partners. However, Aqr Long Short Equity is 1.37 times less risky than Dearborn Partners. It trades about 0.24 of its potential returns per unit of risk. Dearborn Partners Rising is currently generating about 0.03 per unit of risk. If you would invest  1,559  in Aqr Long Short Equity on December 19, 2024 and sell it today you would earn a total of  123.00  from holding Aqr Long Short Equity or generate 7.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Aqr Long Short Equity  vs.  Dearborn Partners Rising

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 abnormal basic indicators, Aqr Long-short may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dearborn Partners Rising

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dearborn Partners Rising are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dearborn Partners 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 Dearborn Partners

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

The idea behind Aqr Long Short Equity and Dearborn Partners Rising 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.