Correlation Between Aqr Large and Gmo Us

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

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

Diversification Opportunities for Aqr Large and Gmo Us

0.94

Correlation Coefficient

Aqr Large  Gmo Us

Almost no diversification

The 3 months correlation between AQR and GMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Gmo Equity Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Equity Allocation and Aqr Large 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 Large Cap are associated (or correlated) with Gmo Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Equity Allocation has no effect on the direction of Aqr Large i.e., Aqr Large and Gmo Us go up and down completely randomly.

Pair Corralation between Aqr Large and Gmo Us

Assuming the 90 days horizon Aqr Large Cap is expected to generate 0.98 times more return on investment than Gmo Us. However, Aqr Large Cap is 1.02 times less risky than Gmo Us. It trades about 0.18 of its potential returns per unit of risk. Gmo Equity Allocation is currently generating about 0.09 per unit of risk. If you would invest  2,061  in Aqr Large Cap on August 25, 2024 and sell it today you would earn a total of  80.00  from holding Aqr Large Cap or generate 3.88% return on investment over 90 days.

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

Aqr Large Cap  vs.  Gmo Equity Allocation

Aqr Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Large Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Equity Allocation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Equity Allocation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Us 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 Large and Gmo Us

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

The idea behind Aqr Large Cap and Gmo Equity Allocation 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.