Correlation Between Aqr Risk-balanced and Aqr Style

Can any of the company-specific risk be diversified away by investing in both Aqr Risk-balanced and Aqr Style 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 Aqr Risk-balanced and Aqr Style into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aqr Risk Balanced Modities and Aqr Style Premia, you can compare the effects of market volatilities on Aqr Risk-balanced and Aqr Style 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 Aqr Risk-balanced with a short position of Aqr Style. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Risk-balanced and Aqr Style.

Diversification Opportunities for Aqr Risk-balanced and Aqr Style

0.86

Correlation Coefficient

Aqr Risk-balanced  Aqr Style

Very poor diversification

The 3 months correlation between AQR and Aqr is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Balanced Modities and Aqr Style Premia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Style Premia and Aqr Risk-balanced 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 Aqr Risk Balanced Modities are associated (or correlated) with Aqr Style. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Style Premia has no effect on the direction of Aqr Risk-balanced i.e., Aqr Risk-balanced and Aqr Style go up and down completely randomly.

Pair Corralation between Aqr Risk-balanced and Aqr Style

Assuming the 90 days horizon Aqr Risk Balanced Modities is expected to generate 1.84 times more return on investment than Aqr Style. However, Aqr Risk-balanced is 1.84 times more volatile than Aqr Style Premia. It trades about 0.19 of its potential returns per unit of risk. Aqr Style Premia is currently generating about 0.15 per unit of risk. If you would invest  880.00  in Aqr Risk Balanced Modities on February 28, 2024 and sell it today you would earn a total of  40.00  from holding Aqr Risk Balanced Modities or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Aqr Risk Balanced Modities  vs.  Aqr Style Premia

Aqr Risk Balanced

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Risk Balanced Modities are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Risk-balanced showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Style Premia

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Style Premia are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Style may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Aqr Risk-balanced and Aqr Style

The main advantage of trading using opposite Aqr Risk-balanced and Aqr Style positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Risk-balanced position performs unexpectedly, Aqr Style 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 Style will offset losses from the drop in Aqr Style's long position.

The idea behind Aqr Risk Balanced Modities and Aqr Style Premia 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.