Correlation Between Alpha Architect and Tidal ETF

Can any of the company-specific risk be diversified away by investing in both Alpha Architect and Tidal ETF 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 Tidal ETF 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 Tidal ETF Trust, you can compare the effects of market volatilities on Alpha Architect and Tidal ETF 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 Tidal ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Tidal ETF.

Diversification Opportunities for Alpha Architect and Tidal ETF

0.63

Correlation Coefficient

Alpha Architect  Tidal ETF

Poor diversification

The 3 months correlation between Alpha and Tidal is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Gdsdn and Tidal ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal ETF Trust 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 Tidal ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal ETF Trust has no effect on the direction of Alpha Architect i.e., Alpha Architect and Tidal ETF go up and down completely randomly.

Pair Corralation between Alpha Architect and Tidal ETF

Given the investment horizon of 90 days Alpha Architect Gdsdn is expected to generate 1.64 times more return on investment than Tidal ETF. However, Alpha Architect is 1.64 times more volatile than Tidal ETF Trust. It trades about 0.06 of its potential returns per unit of risk. Tidal ETF Trust is currently generating about 0.03 per unit of risk. If you would invest  3,088  in Alpha Architect Gdsdn on December 1, 2024 and sell it today you would earn a total of  121.00  from holding Alpha Architect Gdsdn or generate 3.92% 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.  Tidal ETF Trust

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Tidal ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal ETF Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tidal ETF 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 Tidal ETF

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

The idea behind Alpha Architect Gdsdn and Tidal ETF Trust 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.