Correlation Between Aqr Tm and Davenport Small

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

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

Diversification Opportunities for Aqr Tm and Davenport Small

-0.05

Correlation Coefficient

Aqr Tm  Davenport Small

Good diversification

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

Pair Corralation between Aqr Tm and Davenport Small

Assuming the 90 days horizon Aqr Tm is expected to generate 4.46 times less return on investment than Davenport Small. But when comparing it to its historical volatility, Aqr Tm Emerging is 1.04 times less risky than Davenport Small. It trades about 0.04 of its potential returns per unit of risk. Davenport Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,706  in Davenport Small Cap on September 4, 2024 and sell it today you would earn a total of  201.00  from holding Davenport Small Cap or generate 11.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aqr Tm Emerging  vs.  Davenport Small Cap

Aqr Tm Emerging

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Tm Emerging are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Tm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Davenport Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davenport Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aqr Tm and Davenport Small

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

The idea behind Aqr Tm Emerging and Davenport Small 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.