Correlation Between Sp Midcap and Aqr International

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

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

Diversification Opportunities for Sp Midcap and Aqr International

-0.5

Correlation Coefficient

Sp Midcap  Aqr International

Very good diversification

The 3 months correlation between SPMIX and Aqr is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Aqr International Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr International and Sp Midcap 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 Sp Midcap Index 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 Sp Midcap i.e., Sp Midcap and Aqr International go up and down completely randomly.

Pair Corralation between Sp Midcap and Aqr International

Assuming the 90 days horizon Sp Midcap Index is expected to under-perform the Aqr International. In addition to that, Sp Midcap is 1.54 times more volatile than Aqr International Defensive. It trades about -0.09 of its total potential returns per unit of risk. Aqr International Defensive is currently generating about 0.23 per unit of volatility. If you would invest  1,390  in Aqr International Defensive on December 19, 2024 and sell it today you would earn a total of  129.00  from holding Aqr International Defensive or generate 9.28% return on investment over 90 days.

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

Sp Midcap Index  vs.  Aqr International Defensive

Sp Midcap Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Sp Midcap 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr International Defensive are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sp Midcap and Aqr International

The main advantage of trading using opposite Sp Midcap and Aqr International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap 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 Sp Midcap Index 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.