Correlation Between Aqr Small and Equity Income
Can any of the company-specific risk be diversified away by investing in both Aqr Small and Equity Income 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 Small and Equity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Small Cap and Equity Income Fund, you can compare the effects of market volatilities on Aqr Small and Equity Income 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 Small with a short position of Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Small and Equity Income.
Diversification Opportunities for Aqr Small and Equity Income
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Aqr and Equity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income and Aqr Small 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 Small Cap are associated (or correlated) with Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Aqr Small i.e., Aqr Small and Equity Income go up and down completely randomly.
Pair Corralation between Aqr Small and Equity Income
Assuming the 90 days horizon Aqr Small Cap is expected to under-perform the Equity Income. In addition to that, Aqr Small is 1.85 times more volatile than Equity Income Fund. It trades about -0.02 of its total potential returns per unit of risk. Equity Income Fund is currently generating about -0.03 per unit of volatility. If you would invest 4,470 in Equity Income Fund on September 13, 2024 and sell it today you would lose (15.00) from holding Equity Income Fund or give up 0.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Small Cap vs. Equity Income Fund
Performance |
| Timeline |
| Aqr Small Cap |
| Equity Income |
Aqr Small and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Small and Equity Income
The main advantage of trading using opposite Aqr Small and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Small position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Aqr Small vs. Hennessy Bp Energy | Aqr Small vs. Gmo Resources | Aqr Small vs. Alpsalerian Energy Infrastructure | Aqr Small vs. Icon Natural Resources |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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