Correlation Between Adaptive Alpha and FT Cboe

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

By analyzing existing cross correlation between Adaptive Alpha Opportunities and FT Cboe Vest, you can compare the effects of market volatilities on Adaptive Alpha and FT Cboe 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 Adaptive Alpha with a short position of FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaptive Alpha and FT Cboe.

Diversification Opportunities for Adaptive Alpha and FT Cboe

0.9

Correlation Coefficient

Adaptive Alpha  FT Cboe

Almost no diversification

The 3 months correlation between Adaptive and DNOV is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Adaptive Alpha Opportunities and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and Adaptive Alpha 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 Adaptive Alpha Opportunities are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Adaptive Alpha i.e., Adaptive Alpha and FT Cboe go up and down completely randomly.

Pair Corralation between Adaptive Alpha and FT Cboe

Given the investment horizon of 90 days Adaptive Alpha Opportunities is expected to under-perform the FT Cboe. In addition to that, Adaptive Alpha is 3.07 times more volatile than FT Cboe Vest. It trades about -0.06 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about -0.05 per unit of volatility. If you would invest  4,298  in FT Cboe Vest on December 28, 2024 and sell it today you would lose (71.35) from holding FT Cboe Vest or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Adaptive Alpha Opportunities  vs.  FT Cboe Vest

Adaptive Alpha Oppor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adaptive Alpha Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Adaptive Alpha and FT Cboe

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

The idea behind Adaptive Alpha Opportunities and FT Cboe Vest 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.