Correlation Between Aqr Sustainable and Wasatch Small

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

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

Diversification Opportunities for Aqr Sustainable and Wasatch Small

-0.12

Correlation Coefficient

Aqr Sustainable  Wasatch Small

Good diversification

The 3 months correlation between Aqr and Wasatch is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Sustainable Long Short and Wasatch Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Small Cap and Aqr Sustainable 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 Sustainable Long Short are associated (or correlated) with Wasatch Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Small Cap has no effect on the direction of Aqr Sustainable i.e., Aqr Sustainable and Wasatch Small go up and down completely randomly.

Pair Corralation between Aqr Sustainable and Wasatch Small

Assuming the 90 days horizon Aqr Sustainable Long Short is expected to generate 0.74 times more return on investment than Wasatch Small. However, Aqr Sustainable Long Short is 1.35 times less risky than Wasatch Small. It trades about 0.07 of its potential returns per unit of risk. Wasatch Small Cap is currently generating about -0.11 per unit of risk. If you would invest  1,314  in Aqr Sustainable Long Short on December 29, 2024 and sell it today you would earn a total of  46.00  from holding Aqr Sustainable Long Short or generate 3.5% return on investment over 90 days.

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

Aqr Sustainable Long Short  vs.  Wasatch Small Cap

Aqr Sustainable Long

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Sustainable Long Short are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aqr Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Sustainable and Wasatch Small

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

The idea behind Aqr Sustainable Long Short and Wasatch 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.