Correlation Between Nasdaq-100(r) and Aqr Diversified

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Aqr Diversified 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 Nasdaq-100(r) and Aqr Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Aqr Diversified Arbitrage, you can compare the effects of market volatilities on Nasdaq-100(r) and Aqr Diversified 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 Nasdaq-100(r) with a short position of Aqr Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Aqr Diversified.

Diversification Opportunities for Nasdaq-100(r) and Aqr Diversified

-0.28

Correlation Coefficient

Nasdaq-100(r)  Aqr Diversified

Very good diversification

The 3 months correlation between Nasdaq-100(r) and Aqr is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Aqr Diversified Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Diversified Arbitrage and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy are associated (or correlated) with Aqr Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Diversified Arbitrage has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Aqr Diversified go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Aqr Diversified

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Aqr Diversified. In addition to that, Nasdaq-100(r) is 9.83 times more volatile than Aqr Diversified Arbitrage. It trades about -0.13 of its total potential returns per unit of risk. Aqr Diversified Arbitrage is currently generating about -0.1 per unit of volatility. If you would invest  1,219  in Aqr Diversified Arbitrage on October 6, 2024 and sell it today you would lose (8.00) from holding Aqr Diversified Arbitrage or give up 0.66% of portfolio value over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Aqr Diversified Arbitrage

Nasdaq 100 2x

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100(r) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Aqr Diversified Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nasdaq-100(r) and Aqr Diversified

The main advantage of trading using opposite Nasdaq-100(r) and Aqr Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Aqr Diversified 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 Diversified will offset losses from the drop in Aqr Diversified's long position.

The idea behind Nasdaq 100 2x Strategy and Aqr Diversified Arbitrage 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.