Correlation Between Aqr Large and Consumer Services

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Can any of the company-specific risk be diversified away by investing in both Aqr Large and Consumer Services 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 Large and Consumer Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Large Cap and Consumer Services Ultrasector, you can compare the effects of market volatilities on Aqr Large and Consumer Services 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 Large with a short position of Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Large and Consumer Services.

Diversification Opportunities for Aqr Large and Consumer Services

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Aqr and Consumer is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services and Aqr Large 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 Large Cap are associated (or correlated) with Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Aqr Large i.e., Aqr Large and Consumer Services go up and down completely randomly.

Pair Corralation between Aqr Large and Consumer Services

Assuming the 90 days horizon Aqr Large Cap is expected to under-perform the Consumer Services. In addition to that, Aqr Large is 1.34 times more volatile than Consumer Services Ultrasector. It trades about -0.13 of its total potential returns per unit of risk. Consumer Services Ultrasector is currently generating about 0.17 per unit of volatility. If you would invest  4,941  in Consumer Services Ultrasector on October 8, 2024 and sell it today you would earn a total of  1,048  from holding Consumer Services Ultrasector or generate 21.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Aqr Large Cap  vs.  Consumer Services Ultrasector

 Performance 
       Timeline  
Aqr Large Cap 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aqr Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
Consumer Services 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Services Ultrasector are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Services showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Large and Consumer Services Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aqr Large and Consumer Services

The main advantage of trading using opposite Aqr Large and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Large position performs unexpectedly, Consumer Services 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 Consumer Services will offset losses from the drop in Consumer Services' long position.
The idea behind Aqr Large Cap and Consumer Services Ultrasector 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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