Correlation Between Aqr Large and Capital World
Can any of the company-specific risk be diversified away by investing in both Aqr Large and Capital World 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 Large and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Large Cap and Capital World Growth, you can compare the effects of market volatilities on Aqr Large and Capital World 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 Large with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Large and Capital World.
Diversification Opportunities for Aqr Large and Capital World
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aqr and Capital is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Aqr Large 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 Large Cap are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Aqr Large i.e., Aqr Large and Capital World go up and down completely randomly.
Pair Corralation between Aqr Large and Capital World
Assuming the 90 days horizon Aqr Large Cap is expected to generate 1.62 times more return on investment than Capital World. However, Aqr Large is 1.62 times more volatile than Capital World Growth. It trades about 0.38 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.18 per unit of risk. If you would invest 2,395 in Aqr Large Cap on September 1, 2024 and sell it today you would earn a total of 186.00 from holding Aqr Large Cap or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Aqr Large Cap vs. Capital World Growth
Performance |
| Timeline |
| Aqr Large Cap |
| Capital World Growth |
Aqr Large and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Large and Capital World
The main advantage of trading using opposite Aqr Large and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Large position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Aqr Large vs. Aqr Large Cap | Aqr Large vs. Aqr International Defensive | Aqr Large vs. Aqr International Defensive | Aqr Large vs. Aqr Long Short Equity |
| Capital World vs. Franklin Adjustable Government | Capital World vs. Dreyfus Government Cash | Capital World vs. Government Securities Fund | Capital World vs. Goldman Sachs Government |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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