Correlation Between Wasatch Small and Aqr Large

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

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

Diversification Opportunities for Wasatch Small and Aqr Large

0.68

Correlation Coefficient

Wasatch Small  Aqr Large

Poor diversification

The 3 months correlation between Wasatch and Aqr is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small 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 Wasatch 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 Wasatch Small 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 Wasatch Small i.e., Wasatch Small and Aqr Large go up and down completely randomly.

Pair Corralation between Wasatch Small and Aqr Large

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Aqr Large. In addition to that, Wasatch Small is 2.59 times more volatile than Aqr Large Cap. It trades about -0.05 of its total potential returns per unit of risk. Aqr Large Cap is currently generating about 0.17 per unit of volatility. If you would invest  2,324  in Aqr Large Cap on September 15, 2024 and sell it today you would earn a total of  227.00  from holding Aqr Large Cap or generate 9.77% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Aqr Large Cap

Wasatch Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aqr Large Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Aqr Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wasatch Small and Aqr Large

The main advantage of trading using opposite Wasatch Small and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small 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 Wasatch Small 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.