Correlation Between Rational Strategic and Aqr Large

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

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

Diversification Opportunities for Rational Strategic and Aqr Large

0.8

Correlation Coefficient

Rational Strategic  Aqr Large

Very poor diversification

The 3 months correlation between Rational and Aqr is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Rational Strategic i.e., Rational Strategic and Aqr Large go up and down completely randomly.

Pair Corralation between Rational Strategic and Aqr Large

Assuming the 90 days horizon Rational Strategic is expected to generate 1.32 times less return on investment than Aqr Large. In addition to that, Rational Strategic is 1.39 times more volatile than Aqr Large Cap. It trades about 0.07 of its total potential returns per unit of risk. Aqr Large Cap is currently generating about 0.12 per unit of volatility. If you would invest  1,909  in Aqr Large Cap on September 13, 2024 and sell it today you would earn a total of  656.00  from holding Aqr Large Cap or generate 34.36% return on investment over 90 days.

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

Rational Strategic Allocation  vs.  Aqr Large Cap

Rational Strategic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Strategic Allocation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rational Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Large Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rational Strategic and Aqr Large

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

The idea behind Rational Strategic Allocation and Aqr Large Cap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.