Correlation Between Aqr Large and Madison Small
Can any of the company-specific risk be diversified away by investing in both Aqr Large and Madison Small 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 Madison Small 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 Madison Small Cap, you can compare the effects of market volatilities on Aqr Large and Madison Small 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 Madison Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Large and Madison Small.
Diversification Opportunities for Aqr Large and Madison Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Aqr and Madison is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Madison Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Small Cap 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 Madison Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Small Cap has no effect on the direction of Aqr Large i.e., Aqr Large and Madison Small go up and down completely randomly.
Pair Corralation between Aqr Large and Madison Small
Assuming the 90 days horizon Aqr Large Cap is expected to under-perform the Madison Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aqr Large Cap is 1.13 times less risky than Madison Small. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Madison Small Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,279 in Madison Small Cap on September 13, 2024 and sell it today you would earn a total of 28.00 from holding Madison Small Cap or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Large Cap vs. Madison Small Cap
Performance |
| Timeline |
| Aqr Large Cap |
| Madison Small Cap |
Aqr Large and Madison Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Large and Madison Small
The main advantage of trading using opposite Aqr Large and Madison Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Large position performs unexpectedly, Madison Small 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 Madison Small will offset losses from the drop in Madison Small'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 International Defensive |
| Madison Small vs. Pender Real Estate | Madison Small vs. Simt Real Estate | Madison Small vs. Commonwealth Real Estate | Madison Small vs. Forum Real Estate |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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