Correlation Between Aqr Long and Clearbridge Small

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

Diversification Opportunities for Aqr Long and Clearbridge Small

0.91

Correlation Coefficient

Aqr Long  Clearbridge Small

Almost no diversification

The 3 months correlation between Aqr and Clearbridge is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Long Short Equity and Clearbridge Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Small Cap and Aqr Long 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 Clearbridge Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Small Cap has no effect on the direction of Aqr Long i.e., Aqr Long and Clearbridge Small go up and down completely randomly.

Pair Corralation between Aqr Long and Clearbridge Small

Assuming the 90 days horizon Aqr Long is expected to generate 1.64 times less return on investment than Clearbridge Small. But when comparing it to its historical volatility, Aqr Long Short Equity is 2.38 times less risky than Clearbridge Small. It trades about 0.25 of its potential returns per unit of risk. Clearbridge Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,365  in Clearbridge Small Cap on September 13, 2024 and sell it today you would earn a total of  303.00  from holding Clearbridge Small Cap or generate 12.81% return on investment over 90 days.

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

Aqr Long Short Equity  vs.  Clearbridge Small Cap

Aqr Long Short

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Clearbridge Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Clearbridge Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aqr Long and Clearbridge Small

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

The idea behind Aqr Long Short Equity and Clearbridge Small Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.