Correlation Between Aqr Long-short and Sarofim Equity

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

Diversification Opportunities for Aqr Long-short and Sarofim Equity

-0.41

Correlation Coefficient

Aqr Long-short  Sarofim Equity

Very good diversification

The 3 months correlation between Aqr and Sarofim is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Long Short Equity and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity 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 Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Aqr Long-short i.e., Aqr Long-short and Sarofim Equity go up and down completely randomly.

Pair Corralation between Aqr Long-short and Sarofim Equity

Assuming the 90 days horizon Aqr Long Short Equity is expected to generate 0.45 times more return on investment than Sarofim Equity. However, Aqr Long Short Equity is 2.22 times less risky than Sarofim Equity. It trades about 0.22 of its potential returns per unit of risk. Sarofim Equity is currently generating about 0.02 per unit of risk. If you would invest  1,034  in Aqr Long Short Equity on December 2, 2024 and sell it today you would earn a total of  717.00  from holding Aqr Long Short Equity or generate 69.34% return on investment over 90 days.

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

Aqr Long Short Equity  vs.  Sarofim Equity

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 24 (%) 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.

Sarofim Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sarofim Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Aqr Long-short and Sarofim Equity

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

The idea behind Aqr Long Short Equity and Sarofim Equity 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.