Correlation Between Tax-managed and Aqr Large

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

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

Diversification Opportunities for Tax-managed and Aqr Large

0.99

Correlation Coefficient

Tax-managed  Aqr Large

No risk reduction

The 3 months correlation between Tax-managed and Aqr is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap 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 Tax-managed 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 Tax Managed Large Cap 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 Tax-managed i.e., Tax-managed and Aqr Large go up and down completely randomly.

Pair Corralation between Tax-managed and Aqr Large

Assuming the 90 days horizon Tax Managed Large Cap is expected to generate 0.74 times more return on investment than Aqr Large. However, Tax Managed Large Cap is 1.35 times less risky than Aqr Large. It trades about 0.12 of its potential returns per unit of risk. Aqr Large Cap is currently generating about 0.07 per unit of risk. If you would invest  6,287  in Tax Managed Large Cap on August 31, 2024 and sell it today you would earn a total of  2,492  from holding Tax Managed Large Cap or generate 39.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.73%
Values	Daily Returns

Tax Managed Large Cap  vs.  Aqr Large Cap

Tax Managed Large

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large 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, Tax-managed may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Aqr Large Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Tax-managed and Aqr Large

The main advantage of trading using opposite Tax-managed and Aqr Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed 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 Tax Managed Large Cap 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.