Correlation Between Aqr Style and Grant Park

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

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

Diversification Opportunities for Aqr Style and Grant Park

-0.3

Correlation Coefficient

Aqr Style  Grant Park

Very good diversification

The 3 months correlation between Aqr and Grant is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Style Premia and Grant Park Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grant Park Multi and Aqr Style 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 Style Premia are associated (or correlated) with Grant Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grant Park Multi has no effect on the direction of Aqr Style i.e., Aqr Style and Grant Park go up and down completely randomly.

Pair Corralation between Aqr Style and Grant Park

Assuming the 90 days horizon Aqr Style Premia is expected to generate 1.48 times more return on investment than Grant Park. However, Aqr Style is 1.48 times more volatile than Grant Park Multi. It trades about 0.02 of its potential returns per unit of risk. Grant Park Multi is currently generating about -0.07 per unit of risk. If you would invest  798.00  in Aqr Style Premia on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Aqr Style Premia or generate 0.88% return on investment over 90 days.

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

Aqr Style Premia  vs.  Grant Park Multi

Aqr Style Premia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Style Premia are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Style is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grant Park Multi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aqr Style and Grant Park

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

The idea behind Aqr Style Premia and Grant Park Multi 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.