Correlation Between Materials Portfolio and Aqr Long

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

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

Diversification Opportunities for Materials Portfolio and Aqr Long

0.05

Correlation Coefficient

Materials Portfolio  Aqr Long

Significant diversification

The 3 months correlation between Materials and Aqr is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short and Materials Portfolio 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 Materials Portfolio Fidelity are associated (or correlated) with Aqr Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Aqr Long go up and down completely randomly.

Pair Corralation between Materials Portfolio and Aqr Long

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to under-perform the Aqr Long. But the mutual fund apears to be less risky and, when comparing its historical volatility, Materials Portfolio Fidelity is 2.09 times less risky than Aqr Long. The mutual fund trades about -0.64 of its potential returns per unit of risk. The Aqr Long Short Equity is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,638  in Aqr Long Short Equity on September 26, 2024 and sell it today you would lose (71.00) from holding Aqr Long Short Equity or give up 4.33% of portfolio value over 90 days.

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

Materials Portfolio Fidelity  vs.  Aqr Long Short Equity

Materials Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aqr Long Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Materials Portfolio and Aqr Long

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

The idea behind Materials Portfolio Fidelity and Aqr Long Short Equity 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.