Correlation Between Dow 2x and Aqr Large
Can any of the company-specific risk be diversified away by investing in both Dow 2x and Aqr Large 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 Dow 2x and Aqr Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Aqr Large Cap, you can compare the effects of market volatilities on Dow 2x and Aqr Large 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 Dow 2x with a short position of Aqr Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Aqr Large.
Diversification Opportunities for Dow 2x and Aqr Large
Poor diversification
The 3 months correlation between Dow and Aqr is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Aqr Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Large Cap and Dow 2x 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 Dow 2x Strategy are associated (or correlated) with Aqr Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Large Cap has no effect on the direction of Dow 2x i.e., Dow 2x and Aqr Large go up and down completely randomly.
Pair Corralation between Dow 2x and Aqr Large
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 0.71 times more return on investment than Aqr Large. However, Dow 2x Strategy is 1.4 times less risky than Aqr Large. It trades about -0.16 of its potential returns per unit of risk. Aqr Large Cap is currently generating about -0.23 per unit of risk. If you would invest 17,860 in Dow 2x Strategy on October 14, 2024 and sell it today you would lose (1,060) from holding Dow 2x Strategy or give up 5.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Aqr Large Cap
Performance |
| Timeline |
| Dow 2x Strategy |
| Aqr Large Cap |
Dow 2x and Aqr Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Aqr Large
The main advantage of trading using opposite Dow 2x and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Aqr Large 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 Large will offset losses from the drop in Aqr Large's long position.| Dow 2x vs. Sp 500 2x | Dow 2x vs. Inverse Dow 2x | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Russell 2000 2x |
| Aqr Large vs. Oberweis Emerging Growth | Aqr Large vs. Dow 2x Strategy | Aqr Large vs. Balanced Strategy Fund | Aqr Large vs. Realestaterealreturn Strategy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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