Correlation Between Tax-managed and Aqr International

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

By analyzing existing cross correlation between Tax Managed Mid Small and Aqr International Defensive, you can compare the effects of market volatilities on Tax-managed and Aqr International 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 Tax-managed with a short position of Aqr International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Aqr International.

Diversification Opportunities for Tax-managed and Aqr International

0.32

Correlation Coefficient

Tax-managed  Aqr International

Weak diversification

The 3 months correlation between Tax-managed and Aqr is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Aqr International Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr International and Tax-managed 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 Tax Managed Mid Small are associated (or correlated) with Aqr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr International has no effect on the direction of Tax-managed i.e., Tax-managed and Aqr International go up and down completely randomly.

Pair Corralation between Tax-managed and Aqr International

Assuming the 90 days horizon Tax Managed Mid Small is expected to generate 1.64 times more return on investment than Aqr International. However, Tax-managed is 1.64 times more volatile than Aqr International Defensive. It trades about 0.03 of its potential returns per unit of risk. Aqr International Defensive is currently generating about 0.03 per unit of risk. If you would invest  3,571  in Tax Managed Mid Small on October 8, 2024 and sell it today you would earn a total of  629.00  from holding Tax Managed Mid Small or generate 17.61% return on investment over 90 days.

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

Tax Managed Mid Small  vs.  Aqr International Defensive

Tax Managed Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tax Managed Mid Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax-managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr International Defensive has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Tax-managed and Aqr International

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

The idea behind Tax Managed Mid Small and Aqr International Defensive 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.