Correlation Between Core Alternative and Alpha Architect

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

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

Diversification Opportunities for Core Alternative and Alpha Architect

0.07

Correlation Coefficient

Core Alternative  Alpha Architect

Significant diversification

The 3 months correlation between Core and Alpha is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Core Alternative ETF 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 Core Alternative 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 Core Alternative ETF 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 Core Alternative i.e., Core Alternative and Alpha Architect go up and down completely randomly.

Pair Corralation between Core Alternative and Alpha Architect

Given the investment horizon of 90 days Core Alternative ETF is expected to generate 0.49 times more return on investment than Alpha Architect. However, Core Alternative ETF is 2.04 times less risky than Alpha Architect. It trades about -0.3 of its potential returns per unit of risk. Alpha Architect Value is currently generating about -0.22 per unit of risk. If you would invest  2,604  in Core Alternative ETF on October 7, 2024 and sell it today you would lose (70.00) from holding Core Alternative ETF or give up 2.69% of portfolio value over 90 days.

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

Core Alternative ETF  vs.  Alpha Architect Value

Core Alternative ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Alternative ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail 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 Core Alternative and Alpha Architect

The main advantage of trading using opposite Core Alternative and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Alternative 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 Core Alternative ETF 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.