Correlation Between California High-yield and Aqr Long

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

By analyzing existing cross correlation between California High Yield Municipal and Aqr Long Short Equity, you can compare the effects of market volatilities on California High-yield and Aqr Long 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 High-yield with a short position of Aqr Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Aqr Long.

Diversification Opportunities for California High-yield and Aqr Long

0.25

Correlation Coefficient

California High-yield  Aqr Long

Modest diversification

The 3 months correlation between California and Aqr is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short and California High-yield 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 High Yield Municipal are associated (or correlated) with Aqr Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of California High-yield i.e., California High-yield and Aqr Long go up and down completely randomly.

Pair Corralation between California High-yield and Aqr Long

Assuming the 90 days horizon California High Yield Municipal is expected to under-perform the Aqr Long. But the mutual fund apears to be less risky and, when comparing its historical volatility, California High Yield Municipal is 2.8 times less risky than Aqr Long. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Aqr Long Short Equity is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,547  in Aqr Long Short Equity on July 15, 2024 and sell it today you would earn a total of  26.00  from holding Aqr Long Short Equity or generate 1.68% return on investment over 90 days.

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

California High Yield Municipa  vs.  Aqr Long Short Equity

California High Yield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in California High Yield Municipal are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, California High-yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr Long Short

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Long Short Equity 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 Long 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 High-yield and Aqr Long

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

The idea behind California High Yield Municipal and Aqr Long Short Equity 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.