Correlation Between Aqr Diversified and American Beacon

Can any of the company-specific risk be diversified away by investing in both Aqr Diversified and American Beacon 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 American Beacon 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 American Beacon Ssi, you can compare the effects of market volatilities on Aqr Diversified and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Diversified and American Beacon.

Diversification Opportunities for Aqr Diversified and American Beacon

0.26

Correlation Coefficient

Aqr Diversified  American Beacon

Modest diversification

The 3 months correlation between Aqr and American is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage and American Beacon Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ssi 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Ssi has no effect on the direction of Aqr Diversified i.e., Aqr Diversified and American Beacon go up and down completely randomly.

Pair Corralation between Aqr Diversified and American Beacon

Assuming the 90 days horizon Aqr Diversified Arbitrage is not expected to generate positive returns. However, Aqr Diversified Arbitrage is 1.93 times less risky than American Beacon. It waists most of its returns potential to compensate for thr risk taken. American Beacon is generating about 0.16 per unit of risk. If you would invest  964.00  in American Beacon Ssi on March 12, 2024 and sell it today you would earn a total of  4.00  from holding American Beacon Ssi or generate 0.41% return on investment over 90 days.

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

Aqr Diversified Arbitrage  vs.  American Beacon Ssi

Aqr Diversified Arbitrage

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Diversified Arbitrage are ranked lower than 1 (%) 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.

American Beacon Ssi

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ssi are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, American Beacon 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 American Beacon

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

The idea behind Aqr Diversified Arbitrage and American Beacon Ssi 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.