Correlation Between Extended Market and Aqr Equity
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Aqr Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Aqr Equity Market, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Aqr Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Aqr Equity.
Diversification Opportunities for Extended Market and Aqr Equity
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extended and AQR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index 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 Extended Market 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 Extended Market Index 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 Extended Market i.e., Extended Market and Aqr Equity go up and down completely randomly.
Pair Corralation between Extended Market and Aqr Equity
Assuming the 90 days horizon Extended Market is expected to generate 1.21 times less return on investment than Aqr Equity. In addition to that, Extended Market is 2.54 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 695.00 in Aqr Equity Market on August 28, 2024 and sell it today you would earn a total of 346.00 from holding Aqr Equity Market or generate 49.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Aqr Equity Market
Performance |
| Timeline |
| Extended Market Index |
| Aqr Equity Market |
Extended Market and Aqr Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Aqr Equity
The main advantage of trading using opposite Extended Market and Aqr Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Income Fund Income | Extended Market vs. Usaa Nasdaq 100 | Extended Market vs. Victory Diversified Stock | Extended Market vs. Intermediate Term Bond Fund |
| Aqr Equity vs. Ultra Short Term Fixed | Aqr Equity vs. T Rowe Price | Aqr Equity vs. Gmo Emerging Country | Aqr Equity vs. Chartwell Short Duration |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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