Correlation Between Dow Jones and Aqr Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Aqr Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Aqr Small Cap, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Aqr Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aqr Small.
Diversification Opportunities for Dow Jones and Aqr Small
Almost no diversification
The 3 months correlation between Dow and Aqr is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Aqr Small go up and down completely randomly.
Pair Corralation between Dow Jones and Aqr Small
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.52 times less return on investment than Aqr Small. But when comparing it to its historical volatility, Dow Jones Industrial is 1.92 times less risky than Aqr Small. It trades about 0.29 of its potential returns per unit of risk. Aqr Small Cap is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,905 in Aqr Small Cap on August 31, 2024 and sell it today you would earn a total of 176.00 from holding Aqr Small Cap or generate 9.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aqr Small Cap
Performance |
| Timeline |
Dow Jones and Aqr Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aqr Small Cap
Pair trading matchups for Aqr Small
Pair Trading with Dow Jones and Aqr Small
The main advantage of trading using opposite Dow Jones and Aqr Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Aqr Small vs. World Energy Fund | Aqr Small vs. Dreyfus Natural Resources | Aqr Small vs. Gamco Natural Resources | Aqr Small vs. Gmo Resources |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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