Correlation Between Aqr Long-short and Small Cap
Can any of the company-specific risk be diversified away by investing in both Aqr Long-short and Small Cap 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 Long-short and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Long Short Equity and Small Cap Stock, you can compare the effects of market volatilities on Aqr Long-short and Small Cap 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 Long-short with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Long-short and Small Cap.
Diversification Opportunities for Aqr Long-short and Small Cap
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aqr and Small is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Long Short Equity and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Aqr Long-short 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 Long Short Equity are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Aqr Long-short i.e., Aqr Long-short and Small Cap go up and down completely randomly.
Pair Corralation between Aqr Long-short and Small Cap
Assuming the 90 days horizon Aqr Long Short Equity is expected to generate 0.28 times more return on investment than Small Cap. However, Aqr Long Short Equity is 3.59 times less risky than Small Cap. It trades about 0.48 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.13 per unit of risk. If you would invest 1,565 in Aqr Long Short Equity on August 24, 2024 and sell it today you would earn a total of 75.00 from holding Aqr Long Short Equity or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Long Short Equity vs. Small Cap Stock
Performance |
| Timeline |
| Aqr Long Short |
| Small Cap Stock |
Aqr Long-short and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Long-short and Small Cap
The main advantage of trading using opposite Aqr Long-short and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Long-short position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Aqr Long-short vs. Ultra Short Fixed Income | Aqr Long-short vs. Touchstone Ultra Short | Aqr Long-short vs. Quantitative Longshort Equity | Aqr Long-short vs. Old Westbury Short Term |
| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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