Correlation Between California Bond and Aqr Global

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

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

Diversification Opportunities for California Bond and Aqr Global

0.41

Correlation Coefficient

California Bond  Aqr Global

Very weak diversification

The 3 months correlation between California and Aqr is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Aqr Global Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Global Macro and California Bond 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 California Bond Fund are associated (or correlated) with Aqr Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Global Macro has no effect on the direction of California Bond i.e., California Bond and Aqr Global go up and down completely randomly.

Pair Corralation between California Bond and Aqr Global

Assuming the 90 days horizon California Bond is expected to generate 1.42 times less return on investment than Aqr Global. But when comparing it to its historical volatility, California Bond Fund is 1.68 times less risky than Aqr Global. It trades about 0.01 of its potential returns per unit of risk. Aqr Global Macro is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Aqr Global Macro on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Aqr Global Macro or generate 0.11% return on investment over 90 days.

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

California Bond Fund  vs.  Aqr Global Macro

California Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aqr Global Macro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with California Bond and Aqr Global

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

The idea behind California Bond Fund and Aqr Global Macro 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.