Correlation Between AdvisorShares Hotel and ALPS

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

By analyzing existing cross correlation between AdvisorShares Hotel ETF and ALPS, you can compare the effects of market volatilities on AdvisorShares Hotel and ALPS 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 AdvisorShares Hotel with a short position of ALPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares Hotel and ALPS.

Diversification Opportunities for AdvisorShares Hotel and ALPS

0.76

Correlation Coefficient

AdvisorShares Hotel  ALPS

Poor diversification

The 3 months correlation between AdvisorShares and ALPS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares Hotel ETF and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS and AdvisorShares Hotel 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 AdvisorShares Hotel ETF are associated (or correlated) with ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of AdvisorShares Hotel i.e., AdvisorShares Hotel and ALPS go up and down completely randomly.

Pair Corralation between AdvisorShares Hotel and ALPS

Given the investment horizon of 90 days AdvisorShares Hotel is expected to generate 1.11 times less return on investment than ALPS. But when comparing it to its historical volatility, AdvisorShares Hotel ETF is 1.02 times less risky than ALPS. It trades about 0.2 of its potential returns per unit of risk. ALPS is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,467  in ALPS on September 25, 2024 and sell it today you would earn a total of  122.00  from holding ALPS or generate 4.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	31.25%
Values	Daily Returns

AdvisorShares Hotel ETF  vs.  ALPS

AdvisorShares Hotel ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Hotel ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, AdvisorShares Hotel showed solid returns over the last few months and may actually be approaching a breakup point.

ALPS

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AdvisorShares Hotel and ALPS

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

The idea behind AdvisorShares Hotel ETF and ALPS 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.