Correlation Between American Funds and Aqr Small
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Aqr Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Conservative and Aqr Small Cap, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Aqr Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Aqr Small.
Diversification Opportunities for American Funds and Aqr Small
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Aqr is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative 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 American Funds 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 American Funds Conservative 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 American Funds i.e., American Funds and Aqr Small go up and down completely randomly.
Pair Corralation between American Funds and Aqr Small
Assuming the 90 days horizon American Funds is expected to generate 5.14 times less return on investment than Aqr Small. But when comparing it to its historical volatility, American Funds Conservative is 5.7 times less risky than Aqr Small. It trades about 0.28 of its potential returns per unit of risk. Aqr Small Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,896 in Aqr Small Cap on September 5, 2024 and sell it today you would earn a total of 191.00 from holding Aqr Small Cap or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds Conservative vs. Aqr Small Cap
Performance |
| Timeline |
| American Funds Conse |
| Aqr Small Cap |
American Funds and Aqr Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Aqr Small
The main advantage of trading using opposite American Funds and Aqr Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Angel Oak Ultrashort | American Funds vs. Locorr Longshort Modities | American Funds vs. Touchstone Ultra Short | American Funds vs. Rbc Short Duration |
| Aqr Small vs. World Energy Fund | Aqr Small vs. Oil Gas Ultrasector | Aqr Small vs. Hennessy Bp Energy | Aqr Small vs. Invesco Energy Fund |
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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