Correlation Between Victory Diversified and Aqr Long

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

By analyzing existing cross correlation between Victory Diversified Stock and Aqr Long Short Equity, you can compare the effects of market volatilities on Victory Diversified and Aqr Long 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 Victory Diversified with a short position of Aqr Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Diversified and Aqr Long.

Diversification Opportunities for Victory Diversified and Aqr Long

0.87

Correlation Coefficient

Victory Diversified  Aqr Long

Very poor diversification

The 3 months correlation between Victory and Aqr is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Victory Diversified Stock and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short and Victory Diversified 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 Victory Diversified Stock are associated (or correlated) with Aqr Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of Victory Diversified i.e., Victory Diversified and Aqr Long go up and down completely randomly.

Pair Corralation between Victory Diversified and Aqr Long

Assuming the 90 days horizon Victory Diversified is expected to generate 1.3 times less return on investment than Aqr Long. In addition to that, Victory Diversified is 1.69 times more volatile than Aqr Long Short Equity. It trades about 0.11 of its total potential returns per unit of risk. Aqr Long Short Equity is currently generating about 0.23 per unit of volatility. If you would invest  1,582  in Aqr Long Short Equity on September 13, 2024 and sell it today you would earn a total of  78.00  from holding Aqr Long Short Equity or generate 4.93% return on investment over 90 days.

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

Victory Diversified Stock  vs.  Aqr Long Short Equity

Victory Diversified Stock

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Diversified Stock are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Victory Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aqr Long Short

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Victory Diversified and Aqr Long

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

The idea behind Victory Diversified Stock and Aqr Long Short Equity 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.