Correlation Between Global Technology and Aqr Large

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

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

Diversification Opportunities for Global Technology and Aqr Large

0.63

Correlation Coefficient

Global Technology  Aqr Large

Poor diversification

The 3 months correlation between Global and Aqr is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio 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 Global Technology 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 Global Technology Portfolio 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 Global Technology i.e., Global Technology and Aqr Large go up and down completely randomly.

Pair Corralation between Global Technology and Aqr Large

Assuming the 90 days horizon Global Technology Portfolio is expected to generate 0.27 times more return on investment than Aqr Large. However, Global Technology Portfolio is 3.75 times less risky than Aqr Large. It trades about 0.17 of its potential returns per unit of risk. Aqr Large Cap is currently generating about -0.24 per unit of risk. If you would invest  2,119  in Global Technology Portfolio on September 20, 2024 and sell it today you would earn a total of  60.00  from holding Global Technology Portfolio or generate 2.83% return on investment over 90 days.

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

Global Technology Portfolio  vs.  Aqr Large Cap

Global Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Technology Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aqr Large Cap

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Global Technology and Aqr Large

The main advantage of trading using opposite Global Technology and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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 Global Technology Portfolio 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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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.