Correlation Between Aqr International and Vanguard Developed
Can any of the company-specific risk be diversified away by investing in both Aqr International and Vanguard Developed 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 International and Vanguard Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr International Defensive and Vanguard Developed Markets, you can compare the effects of market volatilities on Aqr International and Vanguard Developed 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 International with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr International and Vanguard Developed.
Diversification Opportunities for Aqr International and Vanguard Developed
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aqr and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Defensive and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Aqr International 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 International Defensive are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Aqr International i.e., Aqr International and Vanguard Developed go up and down completely randomly.
Pair Corralation between Aqr International and Vanguard Developed
Assuming the 90 days horizon Aqr International Defensive is expected to generate 0.87 times more return on investment than Vanguard Developed. However, Aqr International Defensive is 1.15 times less risky than Vanguard Developed. It trades about -0.14 of its potential returns per unit of risk. Vanguard Developed Markets is currently generating about -0.14 per unit of risk. If you would invest 1,411 in Aqr International Defensive on January 26, 2024 and sell it today you would lose (27.00) from holding Aqr International Defensive or give up 1.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr International Defensive vs. Vanguard Developed Markets
Performance |
| Timeline |
| Aqr International |
| Vanguard Developed |
Aqr International and Vanguard Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr International and Vanguard Developed
The main advantage of trading using opposite Aqr International and Vanguard Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr International position performs unexpectedly, Vanguard Developed 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 Vanguard Developed will offset losses from the drop in Vanguard Developed's long position.| Aqr International vs. Vanguard Total International | Aqr International vs. Vanguard Developed Markets | Aqr International vs. Fidelity International Index |
| Vanguard Developed vs. Vanguard Total International | Vanguard Developed vs. Vanguard Developed Markets | Vanguard Developed vs. Fidelity International Index |
Check out your portfolio center.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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