Correlation Between Aptus Drawdown and Alpha Architect

Can any of the company-specific risk be diversified away by investing in both Aptus Drawdown 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 Drawdown 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 Drawdown Managed and Alpha Architect Quantitative, you can compare the effects of market volatilities on Aptus Drawdown 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 Drawdown with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptus Drawdown and Alpha Architect.

Diversification Opportunities for Aptus Drawdown and Alpha Architect

0.73

Correlation Coefficient

Aptus Drawdown  Alpha Architect

Poor diversification

The 3 months correlation between Aptus and Alpha is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Drawdown Managed and Alpha Architect Quantitative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Quan and Aptus Drawdown 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 Drawdown Managed 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 Quan has no effect on the direction of Aptus Drawdown i.e., Aptus Drawdown and Alpha Architect go up and down completely randomly.

Pair Corralation between Aptus Drawdown and Alpha Architect

Given the investment horizon of 90 days Aptus Drawdown Managed is expected to generate 0.56 times more return on investment than Alpha Architect. However, Aptus Drawdown Managed is 1.79 times less risky than Alpha Architect. It trades about -0.18 of its potential returns per unit of risk. Alpha Architect Quantitative is currently generating about -0.43 per unit of risk. If you would invest  4,749  in Aptus Drawdown Managed on December 5, 2024 and sell it today you would lose (148.00) from holding Aptus Drawdown Managed or give up 3.12% of portfolio value over 90 days.

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

Aptus Drawdown Managed  vs.  Alpha Architect Quantitative

Aptus Drawdown Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aptus Drawdown Managed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Aptus Drawdown is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Alpha Architect Quan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Architect Quantitative has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Aptus Drawdown and Alpha Architect

The main advantage of trading using opposite Aptus Drawdown and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptus Drawdown 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 Drawdown Managed and Alpha Architect Quantitative 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.