Correlation Between Aqr International and Aqr Small
Can any of the company-specific risk be diversified away by investing in both Aqr International and Aqr 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 International and Aqr Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr International Defensive and Aqr Small Cap, you can compare the effects of market volatilities on Aqr International and Aqr 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 International with a short position of Aqr Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr International and Aqr Small.
Diversification Opportunities for Aqr International and Aqr Small
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Aqr and Aqr is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Defensive and Aqr Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Small Cap and Aqr International 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 International Defensive are associated (or correlated) with Aqr Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Small Cap has no effect on the direction of Aqr International i.e., Aqr International and Aqr Small go up and down completely randomly.
Pair Corralation between Aqr International and Aqr Small
Assuming the 90 days horizon Aqr International Defensive is expected to under-perform the Aqr Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aqr International Defensive is 2.8 times less risky than Aqr Small. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Aqr Small Cap is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,314 in Aqr Small Cap on August 27, 2024 and sell it today you would earn a total of 203.00 from holding Aqr Small Cap or generate 8.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr International Defensive vs. Aqr Small Cap
Performance |
| Timeline |
| Aqr International |
| Aqr Small Cap |
Aqr International and Aqr Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr International and Aqr Small
The main advantage of trading using opposite Aqr International and Aqr Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr International position performs unexpectedly, Aqr 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 Aqr Small will offset losses from the drop in Aqr Small's long position.| Aqr International vs. Aqr Large Cap | Aqr International vs. Aqr Large Cap | Aqr International vs. Aqr International Defensive | Aqr International vs. Aqr Long Short Equity |
| Aqr Small vs. Aqr Large Cap | Aqr Small vs. Aqr Large Cap | Aqr Small vs. Aqr International Defensive | Aqr Small vs. Aqr International Defensive |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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