Correlation Between ALPSSmith Balanced and X Square

Can any of the company-specific risk be diversified away by investing in both ALPSSmith Balanced and X Square 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 ALPSSmith Balanced and X Square into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALPSSmith Balanced Opportunity and X Square Balanced, you can compare the effects of market volatilities on ALPSSmith Balanced and X Square 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 ALPSSmith Balanced with a short position of X Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPSSmith Balanced and X Square.

Diversification Opportunities for ALPSSmith Balanced and X Square

0.98

Correlation Coefficient

ALPSSmith Balanced  X Square

Almost no diversification

The 3 months correlation between ALPSSmith and SQBIX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding ALPSSmith Balanced Opportunity and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced and ALPSSmith Balanced 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 ALPSSmith Balanced Opportunity are associated (or correlated) with X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of ALPSSmith Balanced i.e., ALPSSmith Balanced and X Square go up and down completely randomly.

Pair Corralation between ALPSSmith Balanced and X Square

Assuming the 90 days horizon ALPSSmith Balanced Opportunity is expected to under-perform the X Square. But the etf apears to be less risky and, when comparing its historical volatility, ALPSSmith Balanced Opportunity is 1.09 times less risky than X Square. The etf trades about -0.06 of its potential returns per unit of risk. The X Square Balanced is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,380  in X Square Balanced on December 30, 2024 and sell it today you would lose (23.00) from holding X Square Balanced or give up 1.67% of portfolio value over 90 days.

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

ALPSSmith Balanced Opportunity  vs.  X Square Balanced

ALPSSmith Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPSSmith Balanced Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, ALPSSmith Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

X Square Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days X Square Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, X Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ALPSSmith Balanced and X Square

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

The idea behind ALPSSmith Balanced Opportunity and X Square Balanced 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.