Can any of the company-specific risk be diversified away by investing in both Aqr Sustainable and Aqr Diversified 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 Sustainable and Aqr Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Sustainable Long Short and Aqr Diversified Arbitrage, you can compare the effects of market volatilities on Aqr Sustainable and Aqr Diversified 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 Sustainable with a short position of Aqr Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Sustainable and Aqr Diversified.
Diversification Opportunities for Aqr Sustainable and Aqr Diversified
The 3 months correlation between Aqr and Aqr is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Sustainable Long Short and Aqr Diversified Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Diversified Arbitrage and Aqr Sustainable 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 Sustainable Long Short are associated (or correlated) with Aqr Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Diversified Arbitrage has no effect on the direction of Aqr Sustainable i.e., Aqr Sustainable and Aqr Diversified go up and down completely randomly.
Pair Corralation between Aqr Sustainable and Aqr Diversified
Assuming the 90 days horizon Aqr Sustainable Long Short is expected to generate 3.78 times more return on investment than Aqr Diversified. However, Aqr Sustainable is 3.78 times more volatile than Aqr Diversified Arbitrage. It trades about 0.54 of its potential returns per unit of risk. Aqr Diversified Arbitrage is currently generating about 0.11 per unit of risk. If you would invest 1,356 in Aqr Sustainable Long Short on March 6, 2024 and sell it today you would earn a total of 45.00 from holding Aqr Sustainable Long Short or generate 3.32% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Sustainable Long Short are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Sustainable may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Diversified Arbitrage are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aqr Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.