Correlation Between Aqr Risk-balanced and Aqr Global

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

By analyzing existing cross correlation between Aqr Risk Balanced Modities and Aqr Global Equity, you can compare the effects of market volatilities on Aqr Risk-balanced and Aqr Global 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 Risk-balanced with a short position of Aqr Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Risk-balanced and Aqr Global.

Diversification Opportunities for Aqr Risk-balanced and Aqr Global

0.61

Correlation Coefficient

Aqr Risk-balanced  Aqr Global

Poor diversification

The 3 months correlation between Aqr and Aqr is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Balanced Modities and Aqr Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Global Equity and Aqr Risk-balanced 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 Risk Balanced Modities are associated (or correlated) with Aqr Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Global Equity has no effect on the direction of Aqr Risk-balanced i.e., Aqr Risk-balanced and Aqr Global go up and down completely randomly.

Pair Corralation between Aqr Risk-balanced and Aqr Global

Assuming the 90 days horizon Aqr Risk-balanced is expected to generate 1.88 times less return on investment than Aqr Global. In addition to that, Aqr Risk-balanced is 1.13 times more volatile than Aqr Global Equity. It trades about 0.09 of its total potential returns per unit of risk. Aqr Global Equity is currently generating about 0.19 per unit of volatility. If you would invest  1,114  in Aqr Global Equity on September 3, 2024 and sell it today you would earn a total of  104.00  from holding Aqr Global Equity or generate 9.34% return on investment over 90 days.

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

Aqr Risk Balanced Modities  vs.  Aqr Global Equity

Aqr Risk Balanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Risk Balanced Modities are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Risk-balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Global Equity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Global Equity are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aqr Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aqr Risk-balanced and Aqr Global

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

The idea behind Aqr Risk Balanced Modities and Aqr Global 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.