Correlation Between Siit Small and Aqr Risk

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

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

Diversification Opportunities for Siit Small and Aqr Risk

0.39

Correlation Coefficient

Siit Small  Aqr Risk

Weak diversification

The 3 months correlation between Siit and Aqr is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Siit Small Mid and Aqr Risk Parity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Risk Parity and Siit Small 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 Siit Small Mid are associated (or correlated) with Aqr Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Risk Parity has no effect on the direction of Siit Small i.e., Siit Small and Aqr Risk go up and down completely randomly.

Pair Corralation between Siit Small and Aqr Risk

Assuming the 90 days horizon Siit Small Mid is expected to under-perform the Aqr Risk. In addition to that, Siit Small is 1.8 times more volatile than Aqr Risk Parity. It trades about -0.03 of its total potential returns per unit of risk. Aqr Risk Parity is currently generating about 0.38 per unit of volatility. If you would invest  1,056  in Aqr Risk Parity on September 14, 2024 and sell it today you would earn a total of  37.00  from holding Aqr Risk Parity or generate 3.5% return on investment over 90 days.

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

Siit Small Mid  vs.  Aqr Risk Parity

Siit Small Mid

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Small Mid are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Siit Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aqr Risk Parity

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Risk Parity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Siit Small and Aqr Risk

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

The idea behind Siit Small Mid and Aqr Risk Parity 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.