Correlation Between Small Cap and Aqr Equity
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Aqr Equity 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 Equity Market, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Aqr Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Aqr Equity.
Diversification Opportunities for Small Cap and Aqr Equity
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 Equity Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Equity Market 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 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 Small Cap i.e., Small Cap and Aqr Equity go up and down completely randomly.
Pair Corralation between Small Cap and Aqr Equity
Assuming the 90 days horizon Small Cap is expected to generate 1.1 times less return on investment than Aqr Equity. In addition to that, Small Cap is 2.92 times more volatile than Aqr Equity Market. It trades about 0.06 of its total potential returns per unit of risk. Aqr Equity Market is currently generating about 0.18 per unit of volatility. If you would invest 809.00 in Aqr Equity Market on September 12, 2024 and sell it today you would earn a total of 236.00 from holding Aqr Equity Market or generate 29.17% 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 Equity Market
Performance |
| Timeline |
| Small Cap Stock |
| Aqr Equity Market |
Small Cap and Aqr Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Aqr Equity
The main advantage of trading using opposite Small Cap and Aqr Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Shelton Emerging Markets | Small Cap vs. Kinetics Market Opportunities | Small Cap vs. Siit Emerging Markets | Small Cap vs. Investec Emerging Markets |
| Aqr Equity vs. Pioneer Diversified High | Aqr Equity vs. Small Cap Stock | Aqr Equity vs. Fidelity Advisor Diversified | Aqr Equity vs. T Rowe Price |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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