Correlation Between Alpha Architect and VanEck Inflation

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

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

Diversification Opportunities for Alpha Architect and VanEck Inflation

0.73

Correlation Coefficient

Alpha Architect  VanEck Inflation

Poor diversification

The 3 months correlation between Alpha and VanEck is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Gdsdn and VanEck Inflation Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Inflation All and Alpha Architect 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 Alpha Architect Gdsdn are associated (or correlated) with VanEck Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Inflation All has no effect on the direction of Alpha Architect i.e., Alpha Architect and VanEck Inflation go up and down completely randomly.

Pair Corralation between Alpha Architect and VanEck Inflation

Given the investment horizon of 90 days Alpha Architect Gdsdn is expected to under-perform the VanEck Inflation. But the etf apears to be less risky and, when comparing its historical volatility, Alpha Architect Gdsdn is 1.44 times less risky than VanEck Inflation. The etf trades about -0.02 of its potential returns per unit of risk. The VanEck Inflation Allocation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,931  in VanEck Inflation Allocation on December 2, 2024 and sell it today you would earn a total of  22.00  from holding VanEck Inflation Allocation or generate 0.75% return on investment over 90 days.

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

Alpha Architect Gdsdn  vs.  VanEck Inflation Allocation

Alpha Architect Gdsdn

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Architect Gdsdn has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Alpha Architect is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VanEck Inflation All

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpha Architect and VanEck Inflation

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

The idea behind Alpha Architect Gdsdn and VanEck Inflation Allocation 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.