Correlation Between Aqr Diversified and New World
Can any of the company-specific risk be diversified away by investing in both Aqr Diversified and New World 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 Diversified and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Diversified Arbitrage and New World Fund, you can compare the effects of market volatilities on Aqr Diversified and New World 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 Diversified with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and New World.
Diversification Opportunities for Aqr Diversified and New World
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aqr and New is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Aqr Diversified 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 Diversified Arbitrage are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and New World go up and down completely randomly.
Pair Corralation between Aqr Diversified and New World
Assuming the 90 days horizon Aqr Diversified is expected to generate 4.12 times less return on investment than New World. But when comparing it to its historical volatility, Aqr Diversified Arbitrage is 6.24 times less risky than New World. It trades about 0.1 of its potential returns per unit of risk. New World Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,388 in New World Fund on September 14, 2024 and sell it today you would earn a total of 894.00 from holding New World Fund or generate 12.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Diversified Arbitrage vs. New World Fund
Performance |
| Timeline |
| Aqr Diversified Arbitrage |
| New World Fund |
Aqr Diversified and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Diversified and New World
The main advantage of trading using opposite Aqr Diversified and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Diversified position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Aqr Diversified vs. Aqr Large Cap | Aqr Diversified vs. Aqr Large Cap | Aqr Diversified vs. Aqr International Defensive | Aqr Diversified vs. Aqr International Defensive |
| New World vs. Pgim Jennison Technology | New World vs. Red Oak Technology | New World vs. Vanguard Information Technology | New World vs. Allianzgi Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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