Correlation Between Eventide Healthcare and Aqr Style
Can any of the company-specific risk be diversified away by investing in both Eventide Healthcare and Aqr Style 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 Eventide Healthcare and Aqr Style into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eventide Healthcare Life and Aqr Style Premia, you can compare the effects of market volatilities on Eventide Healthcare and Aqr Style 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 Eventide Healthcare with a short position of Aqr Style. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eventide Healthcare and Aqr Style.
Diversification Opportunities for Eventide Healthcare and Aqr Style
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Eventide and Aqr is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Eventide Healthcare Life and Aqr Style Premia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Style Premia and Eventide Healthcare 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 Eventide Healthcare Life are associated (or correlated) with Aqr Style. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Style Premia has no effect on the direction of Eventide Healthcare i.e., Eventide Healthcare and Aqr Style go up and down completely randomly.
Pair Corralation between Eventide Healthcare and Aqr Style
Assuming the 90 days horizon Eventide Healthcare is expected to generate 2.98 times less return on investment than Aqr Style. But when comparing it to its historical volatility, Eventide Healthcare Life is 1.03 times less risky than Aqr Style. It trades about 0.02 of its potential returns per unit of risk. Aqr Style Premia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 619.00 in Aqr Style Premia on September 14, 2024 and sell it today you would earn a total of 199.00 from holding Aqr Style Premia or generate 32.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eventide Healthcare Life vs. Aqr Style Premia
Performance |
| Timeline |
| Eventide Healthcare Life |
| Aqr Style Premia |
Eventide Healthcare and Aqr Style Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eventide Healthcare and Aqr Style
The main advantage of trading using opposite Eventide Healthcare and Aqr Style positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eventide Healthcare position performs unexpectedly, Aqr Style 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 Style will offset losses from the drop in Aqr Style's long position.The idea behind Eventide Healthcare Life and Aqr Style Premia pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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