Correlation Between Aqr Style and Gmo Alternative

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

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

Diversification Opportunities for Aqr Style and Gmo Alternative

0.73

Correlation Coefficient

Aqr Style  Gmo Alternative

Poor diversification

The 3 months correlation between Aqr and Gmo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Style Premia and Gmo Alternative Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Alternative Allo and Aqr Style 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 Style Premia are associated (or correlated) with Gmo Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Alternative Allo has no effect on the direction of Aqr Style i.e., Aqr Style and Gmo Alternative go up and down completely randomly.

Pair Corralation between Aqr Style and Gmo Alternative

Assuming the 90 days horizon Aqr Style Premia is expected to generate 0.83 times more return on investment than Gmo Alternative. However, Aqr Style Premia is 1.21 times less risky than Gmo Alternative. It trades about 0.35 of its potential returns per unit of risk. Gmo Alternative Allocation is currently generating about 0.17 per unit of risk. If you would invest  761.00  in Aqr Style Premia on December 19, 2024 and sell it today you would earn a total of  86.00  from holding Aqr Style Premia or generate 11.3% return on investment over 90 days.

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

Aqr Style Premia  vs.  Gmo Alternative Allocation

Aqr Style Premia

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Style Premia are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Style may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gmo Alternative Allo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Alternative Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Gmo Alternative may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aqr Style and Gmo Alternative

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

The idea behind Aqr Style Premia and Gmo Alternative Allocation 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.