Correlation Between Aqr Small and Aqr Equity
Can any of the company-specific risk be diversified away by investing in both Aqr Small and Aqr Equity 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 Aqr Equity 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 Aqr Equity Market, you can compare the effects of market volatilities on Aqr Small and Aqr Equity 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 Aqr Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Small and Aqr Equity.
Diversification Opportunities for Aqr Small and Aqr Equity
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aqr and Aqr is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Aqr Equity Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Equity Market 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 Aqr Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Equity Market has no effect on the direction of Aqr Small i.e., Aqr Small and Aqr Equity go up and down completely randomly.
Pair Corralation between Aqr Small and Aqr Equity
Assuming the 90 days horizon Aqr Small Cap is expected to generate 4.42 times more return on investment than Aqr Equity. However, Aqr Small is 4.42 times more volatile than Aqr Equity Market. It trades about 0.27 of its potential returns per unit of risk. Aqr Equity Market is currently generating about 0.37 per unit of risk. If you would invest 2,287 in Aqr Small Cap on September 3, 2024 and sell it today you would earn a total of 223.00 from holding Aqr Small Cap or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Small Cap vs. Aqr Equity Market
Performance |
| Timeline |
| Aqr Small Cap |
| Aqr Equity Market |
Aqr Small and Aqr Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Small and Aqr Equity
The main advantage of trading using opposite Aqr Small and Aqr Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Small position performs unexpectedly, Aqr Equity 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 Equity will offset losses from the drop in Aqr Equity's long position.| Aqr Small vs. The Hartford Midcap | Aqr Small vs. Mfs Emerging Markets | Aqr Small vs. Wells Fargo Special | Aqr Small vs. Washington Mutual Investors |
| Aqr Equity vs. Goldman Sachs Financial | Aqr Equity vs. Prudential Financial Services | Aqr Equity vs. Transamerica Financial Life | Aqr Equity vs. Royce Global Financial |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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