Correlation Between Small Cap and Aqr Risk
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Aqr Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Aqr Risk Parity, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Aqr Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Aqr Risk.
Diversification Opportunities for Small Cap and Aqr Risk
Pay attention - limited upside
The 3 months correlation between Small and Aqr is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock 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 Small Cap 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Aqr Risk go up and down completely randomly.
Pair Corralation between Small Cap and Aqr Risk
Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Aqr Risk. In addition to that, Small Cap is 1.83 times more volatile than Aqr Risk Parity. It trades about -0.11 of its total potential returns per unit of risk. Aqr Risk Parity is currently generating about 0.13 per unit of volatility. If you would invest 1,041 in Aqr Risk Parity on December 27, 2024 and sell it today you would earn a total of 49.00 from holding Aqr Risk Parity or generate 4.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
Small Cap Stock vs. Aqr Risk Parity
Performance |
Timeline |
Small Cap Stock |
Aqr Risk Parity |
Small Cap and Aqr Risk Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Aqr Risk
The main advantage of trading using opposite Small Cap and Aqr Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.Small Cap vs. Calvert High Yield | Small Cap vs. Artisan High Income | Small Cap vs. Muzinich High Yield | Small Cap vs. American Century High |
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Check out your portfolio center.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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