Correlation Between Fundamental Large and Aqr Large

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

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

Diversification Opportunities for Fundamental Large and Aqr Large

0.86

Correlation Coefficient

Fundamental Large  Aqr Large

Very poor diversification

The 3 months correlation between Fundamental and Aqr is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Fundamental Large i.e., Fundamental Large and Aqr Large go up and down completely randomly.

Pair Corralation between Fundamental Large and Aqr Large

Assuming the 90 days horizon Fundamental Large Cap is expected to generate 0.79 times more return on investment than Aqr Large. However, Fundamental Large Cap is 1.26 times less risky than Aqr Large. It trades about -0.15 of its potential returns per unit of risk. Aqr Large Cap is currently generating about -0.13 per unit of risk. If you would invest  7,690  in Fundamental Large Cap on November 28, 2024 and sell it today you would lose (1,003) from holding Fundamental Large Cap or give up 13.04% of portfolio value over 90 days.

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

Fundamental Large Cap  vs.  Aqr Large Cap

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap 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 March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Aqr Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqr Large Cap 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 March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fundamental Large and Aqr Large

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

The idea behind Fundamental Large Cap and Aqr Large Cap 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.