Correlation Between Aqr Small and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Aqr Small and Sterling Capital 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 Sterling Capital 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 Sterling Capital Securitized, you can compare the effects of market volatilities on Aqr Small and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Small and Sterling Capital.

Diversification Opportunities for Aqr Small and Sterling Capital

-0.61

Correlation Coefficient

Aqr Small  Sterling Capital

Excellent diversification

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

Pair Corralation between Aqr Small and Sterling Capital

Assuming the 90 days horizon Aqr Small Cap is expected to under-perform the Sterling Capital. In addition to that, Aqr Small is 4.55 times more volatile than Sterling Capital Securitized. It trades about -0.06 of its total potential returns per unit of risk. Sterling Capital Securitized is currently generating about 0.11 per unit of volatility. If you would invest  881.00  in Sterling Capital Securitized on December 28, 2024 and sell it today you would earn a total of  16.00  from holding Sterling Capital Securitized or generate 1.82% return on investment over 90 days.

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

Aqr Small Cap  vs.  Sterling Capital Securitized

Aqr Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqr Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sterling Capital Sec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Securitized are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sterling Capital 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 Small and Sterling Capital

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

The idea behind Aqr Small Cap and Sterling Capital Securitized 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.