Correlation Between Aqr International and Aqr Tm
Can any of the company-specific risk be diversified away by investing in both Aqr International and Aqr Tm 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 Tm 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 Tm Emerging, you can compare the effects of market volatilities on Aqr International and Aqr Tm 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 Tm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr International and Aqr Tm.
Diversification Opportunities for Aqr International and Aqr Tm
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aqr and Aqr is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Defensive and Aqr Tm Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Tm Emerging 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 Tm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Tm Emerging has no effect on the direction of Aqr International i.e., Aqr International and Aqr Tm go up and down completely randomly.
Pair Corralation between Aqr International and Aqr Tm
Assuming the 90 days horizon Aqr International Defensive is expected to generate 0.69 times more return on investment than Aqr Tm. However, Aqr International Defensive is 1.45 times less risky than Aqr Tm. It trades about -0.19 of its potential returns per unit of risk. Aqr Tm Emerging is currently generating about -0.19 per unit of risk. If you would invest 1,495 in Aqr International Defensive on August 27, 2024 and sell it today you would lose (40.00) from holding Aqr International Defensive or give up 2.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr International Defensive vs. Aqr Tm Emerging
Performance |
| Timeline |
| Aqr International |
| Aqr Tm Emerging |
Aqr International and Aqr Tm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr International and Aqr Tm
The main advantage of trading using opposite Aqr International and Aqr Tm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr International position performs unexpectedly, Aqr Tm 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 Tm will offset losses from the drop in Aqr Tm'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 International Defensive |
| Aqr Tm vs. Aqr Large Cap | Aqr Tm vs. Aqr Large Cap | Aqr Tm vs. Aqr International Defensive | Aqr Tm 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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