Correlation Between Small Cap and Aqr Long-short
Can any of the company-specific risk be diversified away by investing in both Small Cap and Aqr Long-short 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 Small Cap and Aqr Long-short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Aqr Long Short Equity, you can compare the effects of market volatilities on Small Cap and Aqr Long-short 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 Small Cap with a short position of Aqr Long-short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Aqr Long-short.
Diversification Opportunities for Small Cap and Aqr Long-short
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Aqr is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short and Small Cap 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 Small Cap Stock are associated (or correlated) with Aqr Long-short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of Small Cap i.e., Small Cap and Aqr Long-short go up and down completely randomly.
Pair Corralation between Small Cap and Aqr Long-short
Assuming the 90 days horizon Small Cap Stock is expected to generate 3.94 times more return on investment than Aqr Long-short. However, Small Cap is 3.94 times more volatile than Aqr Long Short Equity. It trades about 0.19 of its potential returns per unit of risk. Aqr Long Short Equity is currently generating about 0.58 per unit of risk. If you would invest 1,419 in Small Cap Stock on August 27, 2024 and sell it today you would earn a total of 94.00 from holding Small Cap Stock or generate 6.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Aqr Long Short Equity
Performance |
| Timeline |
| Small Cap Stock |
| Aqr Long Short |
Small Cap and Aqr Long-short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Aqr Long-short
The main advantage of trading using opposite Small Cap and Aqr Long-short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Aqr Long-short 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 Long-short will offset losses from the drop in Aqr Long-short's long position.| Small Cap vs. Victory Rs Growth | Small Cap vs. Praxis Growth Index | Small Cap vs. Qs Moderate Growth | Small Cap vs. T Rowe Price |
| Aqr Long-short vs. Auer Growth Fund | Aqr Long-short vs. Archer Balanced Fund | Aqr Long-short vs. Ab Value Fund | Aqr Long-short vs. Qs Growth 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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