Correlation Between Aqr Diversified and Government Securities
Can any of the company-specific risk be diversified away by investing in both Aqr Diversified and Government Securities 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 Government Securities 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 Government Securities Fund, you can compare the effects of market volatilities on Aqr Diversified and Government Securities 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 Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and Government Securities.
Diversification Opportunities for Aqr Diversified and Government Securities
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aqr and Government is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and Government Securities go up and down completely randomly.
Pair Corralation between Aqr Diversified and Government Securities
Assuming the 90 days horizon Aqr Diversified Arbitrage is expected to under-perform the Government Securities. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aqr Diversified Arbitrage is 1.38 times less risky than Government Securities. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Government Securities Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 876.00 in Government Securities Fund on September 13, 2024 and sell it today you would earn a total of 8.00 from holding Government Securities Fund or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Diversified Arbitrage vs. Government Securities Fund
Performance |
| Timeline |
| Aqr Diversified Arbitrage |
| Government Securities |
Aqr Diversified and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Diversified and Government Securities
The main advantage of trading using opposite Aqr Diversified and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Diversified position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.| Aqr Diversified vs. Sit Government Securities | Aqr Diversified vs. Dunham Porategovernment Bond | Aqr Diversified vs. Intermediate Government Bond | Aqr Diversified vs. Lord Abbett Government |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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