Correlation Between Inverse Emerging and Aqr Sustainable

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

By analyzing existing cross correlation between Inverse Emerging Markets and Aqr Sustainable Long Short, you can compare the effects of market volatilities on Inverse Emerging and Aqr Sustainable 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 Inverse Emerging with a short position of Aqr Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Emerging and Aqr Sustainable.

Diversification Opportunities for Inverse Emerging and Aqr Sustainable

0.05

Correlation Coefficient

Inverse Emerging  Aqr Sustainable

Significant diversification

The 3 months correlation between Inverse and Aqr is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Emerging Markets and Aqr Sustainable Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Sustainable Long and Inverse Emerging 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 Inverse Emerging Markets are associated (or correlated) with Aqr Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Sustainable Long has no effect on the direction of Inverse Emerging i.e., Inverse Emerging and Aqr Sustainable go up and down completely randomly.

Pair Corralation between Inverse Emerging and Aqr Sustainable

Assuming the 90 days horizon Inverse Emerging Markets is expected to generate 1.07 times more return on investment than Aqr Sustainable. However, Inverse Emerging is 1.07 times more volatile than Aqr Sustainable Long Short. It trades about 0.09 of its potential returns per unit of risk. Aqr Sustainable Long Short is currently generating about -0.06 per unit of risk. If you would invest  773.00  in Inverse Emerging Markets on October 10, 2024 and sell it today you would earn a total of  89.00  from holding Inverse Emerging Markets or generate 11.51% return on investment over 90 days.

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

Inverse Emerging Markets  vs.  Aqr Sustainable Long Short

Inverse Emerging Markets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Sustainable Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Sustainable Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Inverse Emerging and Aqr Sustainable

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

The idea behind Inverse Emerging Markets and Aqr Sustainable Long Short 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.