Correlation Between Amplify CWP and TappAlpha SPY

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

By analyzing existing cross correlation between Amplify CWP Enhanced and TappAlpha SPY Growth, you can compare the effects of market volatilities on Amplify CWP and TappAlpha SPY 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 Amplify CWP with a short position of TappAlpha SPY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amplify CWP and TappAlpha SPY.

Diversification Opportunities for Amplify CWP and TappAlpha SPY

0.81

Correlation Coefficient

Amplify CWP  TappAlpha SPY

Very poor diversification

The 3 months correlation between Amplify and TappAlpha is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amplify CWP Enhanced and TappAlpha SPY Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TappAlpha SPY Growth and Amplify CWP 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 Amplify CWP Enhanced are associated (or correlated) with TappAlpha SPY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TappAlpha SPY Growth has no effect on the direction of Amplify CWP i.e., Amplify CWP and TappAlpha SPY go up and down completely randomly.

Pair Corralation between Amplify CWP and TappAlpha SPY

Given the investment horizon of 90 days Amplify CWP Enhanced is expected to under-perform the TappAlpha SPY. But the etf apears to be less risky and, when comparing its historical volatility, Amplify CWP Enhanced is 1.39 times less risky than TappAlpha SPY. The etf trades about -0.11 of its potential returns per unit of risk. The TappAlpha SPY Growth is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,572  in TappAlpha SPY Growth on October 9, 2024 and sell it today you would lose (24.00) from holding TappAlpha SPY Growth or give up 0.93% of portfolio value over 90 days.

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

Amplify CWP Enhanced  vs.  TappAlpha SPY Growth

Amplify CWP Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amplify CWP Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amplify CWP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TappAlpha SPY Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TappAlpha SPY Growth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, TappAlpha SPY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amplify CWP and TappAlpha SPY

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

The idea behind Amplify CWP Enhanced and TappAlpha SPY Growth 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.