Correlation Between Abbey Capital and Aqr Managed

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

By analyzing existing cross correlation between Abbey Capital Futures and Aqr Managed Futures, you can compare the effects of market volatilities on Abbey Capital and Aqr Managed 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 Abbey Capital with a short position of Aqr Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbey Capital and Aqr Managed.

Diversification Opportunities for Abbey Capital and Aqr Managed

0.97

Correlation Coefficient

Abbey Capital  Aqr Managed

Almost no diversification

The 3 months correlation between Abbey and Aqr is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Abbey Capital Futures and Aqr Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Managed Futures and Abbey Capital 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 Abbey Capital Futures are associated (or correlated) with Aqr Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Managed Futures has no effect on the direction of Abbey Capital i.e., Abbey Capital and Aqr Managed go up and down completely randomly.

Pair Corralation between Abbey Capital and Aqr Managed

Assuming the 90 days horizon Abbey Capital Futures is expected to generate 0.54 times more return on investment than Aqr Managed. However, Abbey Capital Futures is 1.84 times less risky than Aqr Managed. It trades about 0.18 of its potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.04 per unit of risk. If you would invest  1,188  in Abbey Capital Futures on January 31, 2024 and sell it today you would earn a total of  23.00  from holding Abbey Capital Futures or generate 1.94% return on investment over 90 days.

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

Abbey Capital Futures  vs.  Aqr Managed Futures

Abbey Capital Futures

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Abbey Capital Futures are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Abbey Capital may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Aqr Managed Futures

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Managed showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abbey Capital and Aqr Managed

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

The idea behind Abbey Capital Futures and Aqr Managed Futures 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.