Correlation Between American Century and Aqr Diversified
Can any of the company-specific risk be diversified away by investing in both American Century and Aqr Diversified 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 American Century and Aqr Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Diversified and Aqr Diversified Arbitrage, you can compare the effects of market volatilities on American Century and Aqr Diversified 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 American Century with a short position of Aqr Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Aqr Diversified.
Diversification Opportunities for American Century and Aqr Diversified
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Aqr is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding American Century Diversified and Aqr Diversified Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Diversified Arbitrage and American Century 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 American Century Diversified are associated (or correlated) with Aqr Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Diversified Arbitrage has no effect on the direction of American Century i.e., American Century and Aqr Diversified go up and down completely randomly.
Pair Corralation between American Century and Aqr Diversified
Assuming the 90 days horizon American Century is expected to generate 1.13 times less return on investment than Aqr Diversified. In addition to that, American Century is 3.1 times more volatile than Aqr Diversified Arbitrage. It trades about 0.04 of its total potential returns per unit of risk. Aqr Diversified Arbitrage is currently generating about 0.14 per unit of volatility. If you would invest 1,170 in Aqr Diversified Arbitrage on November 14, 2024 and sell it today you would earn a total of 52.00 from holding Aqr Diversified Arbitrage or generate 4.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Century Diversified vs. Aqr Diversified Arbitrage
Performance |
Timeline |
American Century Div |
Aqr Diversified Arbitrage |
American Century and Aqr Diversified Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Century and Aqr Diversified
The main advantage of trading using opposite American Century and Aqr Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Aqr Diversified 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 Diversified will offset losses from the drop in Aqr Diversified's long position.The idea behind American Century Diversified and Aqr Diversified Arbitrage 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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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 Stocks Directory module to find actively traded stocks across global markets.
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