Correlation Between Aqr Managed and Small Cap

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

By analyzing existing cross correlation between Aqr Managed Futures and Small Cap Index, you can compare the effects of market volatilities on Aqr Managed and Small Cap 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 Managed with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Managed and Small Cap.

Diversification Opportunities for Aqr Managed and Small Cap

-0.69

Correlation Coefficient

Aqr Managed  Small Cap

Excellent diversification

The 3 months correlation between Aqr and Small is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Managed Futures and Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Index and Aqr Managed 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 Managed Futures are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Index has no effect on the direction of Aqr Managed i.e., Aqr Managed and Small Cap go up and down completely randomly.

Pair Corralation between Aqr Managed and Small Cap

Assuming the 90 days horizon Aqr Managed Futures is expected to generate 0.7 times more return on investment than Small Cap. However, Aqr Managed Futures is 1.42 times less risky than Small Cap. It trades about 0.14 of its potential returns per unit of risk. Small Cap Index is currently generating about -0.13 per unit of risk. If you would invest  836.00  in Aqr Managed Futures on December 27, 2024 and sell it today you would earn a total of  68.00  from holding Aqr Managed Futures or generate 8.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Aqr Managed Futures  vs.  Small Cap Index

Aqr Managed Futures

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aqr Managed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Small Cap Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Aqr Managed and Small Cap

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

The idea behind Aqr Managed Futures and Small Cap 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.