Correlation Between Aqr Small and Gmo Small

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

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

Diversification Opportunities for Aqr Small and Gmo Small

0.94

Correlation Coefficient

Aqr Small  Gmo Small

Almost no diversification

The 3 months correlation between Aqr and Gmo is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap and Aqr Small 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 Small Cap are associated (or correlated) with Gmo Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Aqr Small i.e., Aqr Small and Gmo Small go up and down completely randomly.

Pair Corralation between Aqr Small and Gmo Small

Assuming the 90 days horizon Aqr Small is expected to generate 1.07 times less return on investment than Gmo Small. In addition to that, Aqr Small is 1.35 times more volatile than Gmo Small Cap. It trades about 0.06 of its total potential returns per unit of risk. Gmo Small Cap is currently generating about 0.09 per unit of volatility. If you would invest  1,744  in Gmo Small Cap on September 13, 2024 and sell it today you would earn a total of  950.00  from holding Gmo Small Cap or generate 54.47% return on investment over 90 days.

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

Aqr Small Cap  vs.  Gmo Small Cap

Aqr Small Cap

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gmo Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aqr Small and Gmo Small

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

The idea behind Aqr Small Cap and Gmo 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.