Correlation Between Aqr Large and Aqr International

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

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

Diversification Opportunities for Aqr Large and Aqr International

-0.7

Correlation Coefficient

Aqr Large  Aqr International

Excellent diversification

The 3 months correlation between AQR and Aqr is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Aqr International Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr International and Aqr Large 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 Large Cap are associated (or correlated) with Aqr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr International has no effect on the direction of Aqr Large i.e., Aqr Large and Aqr International go up and down completely randomly.

Pair Corralation between Aqr Large and Aqr International

Assuming the 90 days horizon Aqr Large Cap is expected to generate 1.37 times more return on investment than Aqr International. However, Aqr Large is 1.37 times more volatile than Aqr International Defensive. It trades about 0.24 of its potential returns per unit of risk. Aqr International Defensive is currently generating about -0.06 per unit of risk. If you would invest  2,253  in Aqr Large Cap on September 3, 2024 and sell it today you would earn a total of  317.00  from holding Aqr Large Cap or generate 14.07% return on investment over 90 days.

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

Aqr Large Cap  vs.  Aqr International Defensive

Aqr Large Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap 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 Large showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr International Defensive has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr International 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 Large and Aqr International

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

The idea behind Aqr Large Cap and Aqr International Defensive 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.