Correlation Between Aqr Large and Federated Ohio

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

Diversification Opportunities for Aqr Large and Federated Ohio

0.58

Correlation Coefficient

Aqr Large  Federated Ohio

Very weak diversification

The 3 months correlation between Aqr and Federated is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Federated Ohio Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Ohio Municipal 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 Federated Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Ohio Municipal has no effect on the direction of Aqr Large i.e., Aqr Large and Federated Ohio go up and down completely randomly.

Pair Corralation between Aqr Large and Federated Ohio

Assuming the 90 days horizon Aqr Large Cap is expected to generate 2.72 times more return on investment than Federated Ohio. However, Aqr Large is 2.72 times more volatile than Federated Ohio Municipal. It trades about 0.1 of its potential returns per unit of risk. Federated Ohio Municipal is currently generating about -0.05 per unit of risk. If you would invest  2,019  in Aqr Large Cap on December 29, 2024 and sell it today you would earn a total of  75.00  from holding Aqr Large Cap or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Aqr Large Cap  vs.  Federated Ohio Municipal

Aqr Large Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Ohio Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Ohio Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Ohio 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 Large and Federated Ohio

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

The idea behind Aqr Large Cap and Federated Ohio Municipal 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.