Correlation Between Sp Midcap and Aqr Tm

Can any of the company-specific risk be diversified away by investing in both Sp Midcap and Aqr Tm 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 Tm 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 Tm Emerging, you can compare the effects of market volatilities on Sp Midcap and Aqr Tm 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 Tm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Aqr Tm.

Diversification Opportunities for Sp Midcap and Aqr Tm

0.5

Correlation Coefficient

Sp Midcap  Aqr Tm

Very weak 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 Tm Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Tm Emerging 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 Tm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Tm Emerging has no effect on the direction of Sp Midcap i.e., Sp Midcap and Aqr Tm go up and down completely randomly.

Pair Corralation between Sp Midcap and Aqr Tm

Assuming the 90 days horizon Sp Midcap Index is expected to generate 1.42 times more return on investment than Aqr Tm. However, Sp Midcap is 1.42 times more volatile than Aqr Tm Emerging. It trades about -0.07 of its potential returns per unit of risk. Aqr Tm Emerging is currently generating about -0.2 per unit of risk. If you would invest  2,758  in Sp Midcap Index on October 7, 2024 and sell it today you would lose (186.00) from holding Sp Midcap Index or give up 6.74% of portfolio value over 90 days.

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

Sp Midcap Index  vs.  Aqr Tm Emerging

Sp Midcap Index

Risk-Adjusted Performance

0 of 100

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 Tm Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Tm Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Sp Midcap and Aqr Tm

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

The idea behind Sp Midcap Index and Aqr Tm Emerging 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.