Correlation Between Aqr Small and Aqr Sustainable

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

Diversification Opportunities for Aqr Small and Aqr Sustainable

-0.22

Correlation Coefficient

Aqr Small  Aqr Sustainable

Very good diversification

The 3 months correlation between Aqr and Aqr is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Aqr Sustainable Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Sustainable Long 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 Aqr Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Sustainable Long has no effect on the direction of Aqr Small i.e., Aqr Small and Aqr Sustainable go up and down completely randomly.

Pair Corralation between Aqr Small and Aqr Sustainable

Assuming the 90 days horizon Aqr Small Cap is expected to under-perform the Aqr Sustainable. In addition to that, Aqr Small is 1.76 times more volatile than Aqr Sustainable Long Short. It trades about -0.09 of its total potential returns per unit of risk. Aqr Sustainable Long Short is currently generating about 0.04 per unit of volatility. If you would invest  1,329  in Aqr Sustainable Long Short on December 18, 2024 and sell it today you would earn a total of  21.00  from holding Aqr Sustainable Long Short or generate 1.58% return on investment over 90 days.

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

Aqr Small Cap  vs.  Aqr Sustainable Long Short

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 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.

Aqr Sustainable Long

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Sustainable Long Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Sustainable 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 Aqr Sustainable

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

The idea behind Aqr Small Cap and Aqr Sustainable Long Short 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.