Correlation Between Diamond Hill and Aqr Sustainable

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

By analyzing existing cross correlation between Diamond Hill Long Short and Aqr Sustainable Long Short, you can compare the effects of market volatilities on Diamond Hill and Aqr Sustainable 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 Diamond Hill with a short position of Aqr Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Aqr Sustainable.

Diversification Opportunities for Diamond Hill and Aqr Sustainable

0.0

Correlation Coefficient

Diamond Hill  Aqr Sustainable

Pay attention - limited upside

The 3 months correlation between Diamond and Aqr is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Long Short and Aqr Sustainable Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Sustainable Long and Diamond Hill 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 Diamond Hill Long Short are associated (or correlated) with Aqr Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Sustainable Long has no effect on the direction of Diamond Hill i.e., Diamond Hill and Aqr Sustainable go up and down completely randomly.

Pair Corralation between Diamond Hill and Aqr Sustainable

Assuming the 90 days horizon Diamond Hill Long Short is expected to under-perform the Aqr Sustainable. But the mutual fund apears to be less risky and, when comparing its historical volatility, Diamond Hill Long Short is 1.71 times less risky than Aqr Sustainable. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Aqr Sustainable Long Short is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,409  in Aqr Sustainable Long Short on September 2, 2024 and sell it today you would earn a total of  98.00  from holding Aqr Sustainable Long Short or generate 6.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Diamond Hill Long Short  vs.  Aqr Sustainable Long Short

Diamond Hill Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Sustainable Long

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Sustainable Long Short are ranked lower than 11 (%) 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 January 2025.

Pair Trading with Diamond Hill and Aqr Sustainable

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

The idea behind Diamond Hill Long Short and Aqr Sustainable Long Short 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..