Correlation Between Wasatch Frontier and Aqr Risk

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

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

Diversification Opportunities for Wasatch Frontier and Aqr Risk

0.26

Correlation Coefficient

Wasatch Frontier  Aqr Risk

Modest diversification

The 3 months correlation between Wasatch and Aqr is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Frontier Emerging 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 Wasatch Frontier 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 Wasatch Frontier Emerging 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 Wasatch Frontier i.e., Wasatch Frontier and Aqr Risk go up and down completely randomly.

Pair Corralation between Wasatch Frontier and Aqr Risk

Assuming the 90 days horizon Wasatch Frontier Emerging is expected to under-perform the Aqr Risk. In addition to that, Wasatch Frontier is 1.05 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 -0.04 per unit of volatility. If you would invest  1,068  in Aqr Risk Parity on October 8, 2024 and sell it today you would lose (18.00) from holding Aqr Risk Parity or give up 1.69% of portfolio value over 90 days.

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

Wasatch Frontier Emerging  vs.  Aqr Risk Parity

Wasatch Frontier Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Frontier Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Wasatch Frontier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Risk Parity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Risk Parity has generated negative risk-adjusted returns adding no value to fund investors. 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 Wasatch Frontier and Aqr Risk

The main advantage of trading using opposite Wasatch Frontier and Aqr Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Frontier 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 Wasatch Frontier Emerging 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.