Correlation Between Aqr Diversified and Cm Modity

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

By analyzing existing cross correlation between Aqr Diversified Arbitrage and Cm Modity Index, you can compare the effects of market volatilities on Aqr Diversified and Cm Modity 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 Diversified with a short position of Cm Modity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and Cm Modity.

Diversification Opportunities for Aqr Diversified and Cm Modity

0.54

Correlation Coefficient

Aqr Diversified  Cm Modity

Very weak diversification

The 3 months correlation between Aqr and COMIX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and Cm Modity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cm Modity Index and Aqr Diversified 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 Diversified Arbitrage are associated (or correlated) with Cm Modity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cm Modity Index has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and Cm Modity go up and down completely randomly.

Pair Corralation between Aqr Diversified and Cm Modity

Assuming the 90 days horizon Aqr Diversified is expected to generate 1.04 times less return on investment than Cm Modity. But when comparing it to its historical volatility, Aqr Diversified Arbitrage is 7.22 times less risky than Cm Modity. It trades about 0.32 of its potential returns per unit of risk. Cm Modity Index is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,902  in Cm Modity Index on May 18, 2025 and sell it today you would earn a total of  117.00  from holding Cm Modity Index or generate 1.7% return on investment over 90 days.

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

Aqr Diversified Arbitrage  vs.  Cm Modity Index

Aqr Diversified Arbitrage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Diversified Arbitrage are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cm Modity Index

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Cm Modity Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cm Modity 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 Diversified and Cm Modity

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

The idea behind Aqr Diversified Arbitrage and Cm Modity Index 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.