Correlation Between Vanguard Financials and Aqr Large
Can any of the company-specific risk be diversified away by investing in both Vanguard Financials 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 Vanguard Financials and Aqr Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Financials Index and Aqr Large Cap, you can compare the effects of market volatilities on Vanguard Financials 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 Vanguard Financials with a short position of Aqr Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Aqr Large.
Diversification Opportunities for Vanguard Financials and Aqr Large
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VANGUARD and Aqr is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index 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 Vanguard Financials 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 Vanguard Financials Index 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 Vanguard Financials i.e., Vanguard Financials and Aqr Large go up and down completely randomly.
Pair Corralation between Vanguard Financials and Aqr Large
Assuming the 90 days horizon Vanguard Financials Index is expected to generate 1.33 times more return on investment than Aqr Large. However, Vanguard Financials is 1.33 times more volatile than Aqr Large Cap. It trades about 0.2 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 5,473 in Vanguard Financials Index on August 31, 2024 and sell it today you would earn a total of 845.00 from holding Vanguard Financials Index or generate 15.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Financials Index vs. Aqr Large Cap
Performance |
| Timeline |
| Vanguard Financials Index |
| Aqr Large Cap |
Vanguard Financials and Aqr Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Financials and Aqr Large
The main advantage of trading using opposite Vanguard Financials and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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.The idea behind Vanguard Financials Index and Aqr Large Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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