Correlation Between Scharf Global and Aqr Risk

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

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

Diversification Opportunities for Scharf Global and Aqr Risk

0.67

Correlation Coefficient

Scharf Global  Aqr Risk

Poor diversification

The 3 months correlation between Scharf and Aqr is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Global Opportunity and Aqr Risk Balanced Modities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Risk Balanced and Scharf Global 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 Scharf Global Opportunity 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 Balanced has no effect on the direction of Scharf Global i.e., Scharf Global and Aqr Risk go up and down completely randomly.

Pair Corralation between Scharf Global and Aqr Risk

Assuming the 90 days horizon Scharf Global is expected to generate 2.32 times less return on investment than Aqr Risk. But when comparing it to its historical volatility, Scharf Global Opportunity is 1.04 times less risky than Aqr Risk. It trades about 0.08 of its potential returns per unit of risk. Aqr Risk Balanced Modities is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  870.00  in Aqr Risk Balanced Modities on December 25, 2024 and sell it today you would earn a total of  76.00  from holding Aqr Risk Balanced Modities or generate 8.74% return on investment over 90 days.

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

Scharf Global Opportunity  vs.  Aqr Risk Balanced Modities

Scharf Global Opportunity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scharf Global Opportunity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Scharf Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Risk Balanced

Risk-Adjusted Performance

Good

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

Pair Trading with Scharf Global and Aqr Risk

The main advantage of trading using opposite Scharf Global and Aqr Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scharf Global 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 Scharf Global Opportunity and Aqr Risk Balanced Modities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.