Correlation Between Aptus Collared and Alpha Architect

Can any of the company-specific risk be diversified away by investing in both Aptus Collared and Alpha Architect 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 Aptus Collared and Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aptus Collared Income and Alpha Architect Value, you can compare the effects of market volatilities on Aptus Collared and Alpha Architect 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 Aptus Collared with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptus Collared and Alpha Architect.

Diversification Opportunities for Aptus Collared and Alpha Architect

0.71

Correlation Coefficient

Aptus Collared  Alpha Architect

Poor diversification

The 3 months correlation between Aptus and Alpha is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Collared Income and Alpha Architect Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Value and Aptus Collared 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 Aptus Collared Income are associated (or correlated) with Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Value has no effect on the direction of Aptus Collared i.e., Aptus Collared and Alpha Architect go up and down completely randomly.

Pair Corralation between Aptus Collared and Alpha Architect

Given the investment horizon of 90 days Aptus Collared Income is expected to generate 0.73 times more return on investment than Alpha Architect. However, Aptus Collared Income is 1.38 times less risky than Alpha Architect. It trades about 0.07 of its potential returns per unit of risk. Alpha Architect Value is currently generating about -0.04 per unit of risk. If you would invest  3,947  in Aptus Collared Income on October 7, 2024 and sell it today you would earn a total of  100.00  from holding Aptus Collared Income or generate 2.53% return on investment over 90 days.

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

Aptus Collared Income  vs.  Alpha Architect Value

Aptus Collared Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aptus Collared Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Aptus Collared is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Alpha Architect Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Architect Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Architect is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aptus Collared and Alpha Architect

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

The idea behind Aptus Collared Income and Alpha Architect Value 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.