Correlation Between Financial Investors and ALPS

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

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

Diversification Opportunities for Financial Investors and ALPS

-0.68

Correlation Coefficient

Financial Investors  ALPS

Excellent diversification

The 3 months correlation between Financial and ALPS is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Financial Investors Trust and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS and Financial Investors 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 Financial Investors Trust 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 Financial Investors i.e., Financial Investors and ALPS go up and down completely randomly.

Pair Corralation between Financial Investors and ALPS

Assuming the 90 days horizon Financial Investors Trust is expected to under-perform the ALPS. In addition to that, Financial Investors is 2.38 times more volatile than ALPS. It trades about -0.14 of its total potential returns per unit of risk. ALPS is currently generating about 0.35 per unit of volatility. If you would invest  2,495  in ALPS on October 3, 2024 and sell it today you would earn a total of  94.00  from holding ALPS or generate 3.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	22.58%
Values	Daily Returns

Financial Investors Trust  vs.  ALPS

Financial Investors Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Investors Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

ALPS

Risk-Adjusted Performance

0 of 100

Strong

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 Financial Investors and ALPS

The main advantage of trading using opposite Financial Investors and ALPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Investors 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 Financial Investors Trust 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.