Correlation Between Aqr Diversified and Small Cap
Can any of the company-specific risk be diversified away by investing in both Aqr Diversified and Small Cap 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 Aqr Diversified and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Diversified Arbitrage and Small Cap Core, you can compare the effects of market volatilities on Aqr Diversified and Small Cap 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 Aqr Diversified with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and Small Cap.
Diversification Opportunities for Aqr Diversified and Small Cap
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aqr and Small is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Aqr 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 Aqr Diversified Arbitrage are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and Small Cap go up and down completely randomly.
Pair Corralation between Aqr Diversified and Small Cap
Assuming the 90 days horizon Aqr Diversified is expected to generate 8.61 times less return on investment than Small Cap. But when comparing it to its historical volatility, Aqr Diversified Arbitrage is 10.62 times less risky than Small Cap. It trades about 0.12 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,297 in Small Cap Core on August 29, 2024 and sell it today you would earn a total of 214.00 from holding Small Cap Core or generate 16.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Diversified Arbitrage vs. Small Cap Core
Performance |
| Timeline |
| Aqr Diversified Arbitrage |
| Small Cap Core |
Aqr Diversified and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Diversified and Small Cap
The main advantage of trading using opposite Aqr Diversified and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Diversified position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Aqr Diversified vs. Gmo High Yield | Aqr Diversified vs. Victory High Yield | Aqr Diversified vs. Msift High Yield | Aqr Diversified vs. Pia High Yield |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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