Correlation Between Capital World and Aqr Managed

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

By analyzing existing cross correlation between Capital World Bond and Aqr Managed Futures, you can compare the effects of market volatilities on Capital World and Aqr Managed 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 Capital World with a short position of Aqr Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Aqr Managed.

Diversification Opportunities for Capital World and Aqr Managed

0.79

Correlation Coefficient

Capital World  Aqr Managed

Poor diversification

The 3 months correlation between Capital and Aqr is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Aqr Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Managed Futures and Capital World 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 Capital World Bond are associated (or correlated) with Aqr Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Managed Futures has no effect on the direction of Capital World i.e., Capital World and Aqr Managed go up and down completely randomly.

Pair Corralation between Capital World and Aqr Managed

Assuming the 90 days horizon Capital World is expected to generate 3.42 times less return on investment than Aqr Managed. But when comparing it to its historical volatility, Capital World Bond is 2.98 times less risky than Aqr Managed. It trades about 0.12 of its potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  833.00  in Aqr Managed Futures on December 28, 2024 and sell it today you would earn a total of  66.00  from holding Aqr Managed Futures or generate 7.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Capital World Bond  vs.  Aqr Managed Futures

Capital World Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Bond are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Managed Futures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aqr Managed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capital World and Aqr Managed

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

The idea behind Capital World Bond and Aqr Managed Futures 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.